KEYCORP /NEW/ 10-K

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Page Number Introduction 50 Corporate strategy 50 Executive overview 51 Results of Operations 53 Earnings overview 53 Net interest income 53 Provision for credit losses 56 Noninterest income 56 Noninterest expense 58 Income taxes 60 Business Segment Results 60 Consumer Bank 60 Commercial Bank 61 Financial Condition 63 Loans and loans held for sale 63 Securities 69 Deposits and other sources of funds 72 Capital 73 Off-Balance Sheet Arrangements and Aggregate Contractual Obligations 75 Off-balance sheet arrangements 75 Guarantees 76 Risk Management 76 Overview 76 Market risk management 78 Liquidity risk management 83 Credit risk management 86 Operational and compliance risk management 90 GAAP to Non-GAAP Reconciliations 91 Critical Accounting Policies and Estimates 92 Allowance for loan and lease losses 93 Valuation methodologies 94 Derivatives and hedging 96 Contingent liabilities, guarantees and income taxes 97 Accounting and reporting developments 98 49 Table of contents Introduction This section reviews the financial condition and results of operations of KeyCorp and its subsidiaries for 2024 and 2023. Some tables may include additional periods to comply with disclosure requirements or to illustrate trends in greater depth. When you read this discussion, you should also refer to the consolidated financial statements and related notes in this report. The page locations of specific sections and notes that we refer to are presented in the Table of Contents. To review our financial condition and results of operations for 2022 and a comparison between the 2022 and 2023 results, see Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations of our 2023 Form 10-K filed with the SEC on February 22, 2024, which discussion is incorporated herein by reference. Corporate strategy We remain committed to enhancing long-term shareholder value by continuing to execute our relationship-based business model, growing our franchise, and being disciplined with respect to capital management. We intend to pursue this commitment by growing profitably; acquiring and expanding targeted client relationships; effectively managing risk and rewards; maintaining financial strength; and engaging, retaining, and inspiring our high-performing and talented workforce and fostering a culture that is fair and inclusive for all. These strategic priorities for enhancing long-term shareholder value are described in more detail below. • Grow profitably — We intend to continue to focus on generating positive operating leverage by growing revenue and creating a more efficient operating environment. We expect our relationship business model to keep generating organic growth as it helps us expand engagement with existing clients and attract new customers. We plan to leverage our continuous improvement culture to maintain an efficient cost structure that is aligned, sustainable, and consistent with the current operating environment and that supports our relationship business model. • Acquire and expand targeted client relationships — We seek to be client-centric in our actions and have taken purposeful steps to enhance our ability to acquire and expand targeted relationships. We seek to provide solutions to serve our clients' needs. We focus on markets and clients where we can be the most relevant. In aligning our businesses and investments against these targeted client segments, we are able to make a meaningful positive impact for our clients. • Effectively manage risk and rewards — Our risk management activities are focused on ensuring we properly identify, measure, and manage risks across the entire company to maintain safety and soundness and maximize profitability. • Maintain financial strength — With the foundation of a strong balance sheet, we intend to remain focused on sustaining strong reserves, liquidity, and capital. We plan to work closely with our Board and regulators to manage capital to support our clients’ needs and drive long-term shareholder value. Our capital position remains strong, and we are well-positioned relative to our capital priorities. • Engage a high-performing and talented workforce — Every day our employees provide our clients with great ideas, extraordinary service, and smart solutions. We intend to continue to engage our high-performing and talented workforce to create an environment where everyone can make a difference, own their careers, be respected, and feel a sense of pride. 50 Table of contents Executive overview Our 2024 financial results were generally positive and reflected the impact of large securities repositioning trades that enhanced our future earnings trajectory. Net interest income was down, reflecting lower loans and changes in interest rates, but remained within our target range versus 2023. Fee growth was stronger than expected reflecting the second highest year of investment banking revenues in our history. At December 31, 2024, our Common Equity Tier 1 and Tier 1 risk-based capital ratios stood at 11.92% and 13.69%, respectively. We achieved meaningful positive operating leverage in the second half of the year and look to continue to deliver earnings growth and operating leverage in 2025. Strategic Minority Investment by Scotiabank On August 12, 2024, we entered into an Investment Agreement with Scotiabank pursuant to which Scotiabank agreed to make a strategic minority investment in KeyCorp of approximately $2.8 billion, representing approximately 14.9% pro forma common stock ownership of KeyCorp, for a fixed price of $17.17 per share. On August 30, 2024, Scotiabank completed the initial purchase of our Common Shares with an investment of approximately $821 million in gross proceeds. Following the initial purchase, Scotiabank owned approximately 4.9% of KeyCorp’s common stock. On December 13, 2024, Key announced that all necessary bank regulatory approvals had been received for completion of Scotiabank’s strategic minority investment in KeyCorp. On December 27, 2024, Scotiabank completed the final purchase of our Common Shares contemplated under the Investment Agreement with an investment of approximately $2.0 billion (the “Second Closing”). Following the Second Closing, Scotiabank owns approximately 14.9% of our Common Shares. On December 27, 2024, in connection with the Second Closing, the Board of Directors of KeyCorp increased the size of the Board to fifteen directors and appointed Jacqueline Allard and Somesh Khanna to serve on the Board, effectively immediately upon the Second Closing. Refer to Note 24 (“Shareholders' Equity”) for additional information on this transaction. Securities Repositioning On September 6, 2024, we initiated a strategic repositioning of our available-for-sale investment securities portfolio by selling approximately $7.0 billion in market value of low-yielding mortgage-backed securities. The mortgage-backed securities that were sold had a weighted average book yield of approximately 2.3% and an average duration of approximately six years. Reinvestment of the proceeds from the sale was completed in October 2024, with the new securities having an average book yield of approximately 4.95% and an average duration of approximately four years. During the third quarter of 2024, along with our customary sale of short-dated U.S. Treasuries set to mature within the quarter, we also sold approximately $3 billion in U.S. Treasuries yielding 50 basis points that were set to mature in the fourth quarter of 2024. The total pre-tax loss on the sale of securities available for sale for the third quarter was $935 million of which $918 million was associated with the strategic repositioning. Prior to the Second Closing, KeyCorp completed the strategic repositioning of its available-for-sale investment securities portfolio by selling an additional $3.0 billion in market value of low-yielding investment securities and terminating approximately $3.0 billion of fair value hedges, resulting in a pre-tax loss of $915 million in the fourth quarter of 2024. The investment securities that were sold had a weighted average book yield of approximately 1.5% and an average duration of approximately eight years. The reinvestment of the proceeds from the repositioning was completed in December 2024, with the new securities having an average book yield of 5.5% and an average duration of approximately four years. In addition to the items described above, the following actions and results during 2024 also supported our overall corporate strategy. • We have expanded our commercial banking business in Chicago and Southern California to serve more middle market clients with our differentiated platform, which includes a full range of commercial lending and capital markets capabilities as well as payments solutions designed specifically for the segment. • We completed core technological modernization projects of our commercial loan platform and our derivatives platform. 51 Table of contents • We ended the year with $61.4 billion in assets under management and administration, a record high, reflecting the strong sales production in our mass affluent segment. • Within our Consumer Bank, we grew relationship households in excess of three percent for the second consecutive year, including growth of five to eight percent throughout our western markets. • We remained committed to our strategy to engage a high-performing and talented workforce and fostering an inclusive environment for all . We continue to be recognized by multiple organizations for our dedication to creating an environment where all employees are treated with respect and empowered to bring their authentic selves to work. Business Outlook Consistent with the forward guidance we provided on January 21, 2025, we expect these results for full year 2025 versus full year 2024. Category 2024 Baseline FY2024 vs FY2023 FY2025 (vs FY 2024) (a) Average loans $107.7 Billion (9)% down 2% to 5% Ending loans $104.3 Billion (7)% Flat vs YE 2024 PE Commercial Loans $71.9 Billion (7)% up 2% to 4% Net interest income (TE) $3,810 Million (3)% up ~20% (b) Adjusted noninterest income (c) $2,645 Million +7% up 5%+ Adjusted noninterest expense (c) $4,520 Million +3% up 3% to 5% Net charge-offs to average loans 41 bps + 20 bps 40 to 45 basis points (FY2025) Effective tax rate ~21% to 22% (FY2025) Tax-equivalent Effective Rate (d) ~23% to 24% (FY2025) (a) Ranges are shown on an operating basis. (b) Additional Guidance: Net interest income (TE): 10%+ 4Q25 vs. 4Q24. (c) Refer to the GAAP to Non-GAAP Reconciliation within Management's Discussion and Analysis of this Form 10-K for the reconciliation of these non-GAAP measures. (d) Reflects the estimated full year taxable-equivalent adjustment. 52 Table of contents Results of Operations Earnings Overview The following chart provides a reconciliation of net income from continuing operations attributable to Key common shareholders for the year ended December 31, 2023, to the year ended December 31, 2024 (dollars in millions): Net interest income One of our principal sources of revenue is net interest income. Net interest income is the difference between interest income received on earning assets (such as loans and securities) and loan-related fee income, and interest expense paid on deposits and borrowings. There are several factors that affect net interest income, including: • the volume, pricing, mix, and maturity of earning assets and interest-bearing liabilities; • the volume and value of net free funds, such as noninterest-bearing deposits and equity capital; • the use of derivative instruments to manage interest rate risk; • interest rate fluctuations and competitive conditions within the marketplace; • asset quality; and • fair value accounting of acquired earning assets and interest-bearing liabilities. To make it easier to compare both the results among several periods and the yields on various types of earning assets (some taxable, some not), we present net interest income in this discussion on a “TE basis” (i.e., as if all income were taxable and at the same rate). For example, $100 of tax-exempt income would be presented as $126, an amount that, if taxed at the statutory federal income tax rate of 21%, would yield $100. 53 Table of contents Net interest income (TE) for 2024 was $3.8 billion, and the net interest margin was 2.16%. Compared to 2023, net interest income (TE) decreased $133 million, and the net interest margin was relatively stable, decreasing by one basis point. The decline in net interest income (TE) and the net interest margin reflects higher deposit costs, partly due to a shift in funding mix from noninterest-bearing deposits to higher cost deposits in 2024, and lower loan balances, in part due to the residual effect of Key’s balance sheet optimization efforts during the second half of 2023. Net interest income (TE) and the net interest margin benefited from higher earning asset yields as a result of the higher interest rate environment, including the reinvestment of proceeds from maturing investment securities into higher-yielding investments. Net interest income (TE) and the net interest margin also benefited from the maturity of interest rate swaps with negative carry, and an increase in lower-cost deposits, which contributed to the decline in wholesale borrowings. In addition, during the second half of 2024, Key completed the available-for-sale portfolio repositioning, which involved the sale and reinvestment of approximately $10.0 billion of lower-yielding mortgaged-backed securities into higher-yielding investments. Average loans totaled $107.7 billion for 2024, compared to $118.0 billion in 2023. The $10.3 billion decrease reflected continued tepid client loan demand. Commercial loans decreased $7.6 billion, due to lower commercial and industrial loans and commercial mortgage real estate loans. Additionally, average consumer loans declined by $2.6 billion, reflective of broad-based declines across all consumer loan categories. Average deposits totaled $146.2 billion for 2024, an increase of $2.1 billion compared to 2023, reflecting growth in both consumer and commercial deposits, partially offset by a decline in brokered CDs. Figure 1 shows the various components of our balance sheet that affect interest income and expense and their respective yields or rates over the past three years. This figure also presents a reconciliation of TE net interest income to net interest income reported in accordance with GAAP for each of those years. The net interest margin, which is an indicator of the profitability of our earning assets less the cost of funding, is calculated by dividing taxable-equivalent net interest income by average earning assets. 54 Table of contents Figure 1. Consolidated Average Balance Sheets, Net Interest Income, and Yields/Rates from Continuing Operations (g) Year ended December 31, 2024 2023 2022 Dollars in millions Average Balance Interest (a) Yield/ Rate (a) Average Balance Interest (a) Yield/ Rate (a) Average Balance Interest (a) Yield/ Rate (a) ASSETS Loans (b), (c) Commercial and industrial (d) $ 53,951 $ 3,378 6.26 % $ 59,379 $ 3,444 5.80 % $ 54,970 $ 2,148 3.91 % Real estate — commercial mortgage 14,080 873 6.20 15,968 931 5.83 15,572 633 4.07 Real estate — construction 3,042 227 7.48 2,755 185 6.71 2,229 99 4.44 Commercial lease financing 3,087 105 3.41 3,703 116 3.13 3,869 98 2.54 Total commercial loans 74,160 4,583 6.18 81,805 4,676 5.72 76,640 2,978 3.89 Real estate — residential mortgage 20,382 674 3.31 21,428 699 3.26 19,036 559 2.94 Home equity loans 6,729 398 5.92 7,522 433 5.76 8,115 347 4.28 Other consumer loans 5,519 278 5.04 6,263 305 4.86 6,552 277 4.27 Credit cards 934 138 14.78 986 136 13.88 959 107 11.23 Total consumer loans 33,564 1,488 4.43 36,199 1,573 4.35 34,662 1,290 3.72 Total loans 107,724 6,071 5.64 118,004 6,249 5.30 111,302 4,268 3.84 Loans held for sale 979 60 6.11 1,012 61 6.06 1,278 56 4.41 Securities available for sale (b), (e) 37,127 1,142 2.71 37,718 793 1.80 42,325 752 1.62 Held-to-maturity securities (b) 7,980 284 3.56 9,008 312 3.46 7,676 213 2.77 Trading account assets 1,175 61 5.16 1,138 55 4.85 850 31 3.61 Short-term investments 14,846 792 5.33 7,349 414 5.63 4,264 97 2.28 Other investments (e) 1,177 62 5.25 1,392 73 5.28 952 22 2.26 Total earning assets 171,008 8,472 4.81 175,621 7,957 4.37 168,647 5,439 3.15 Allowance for loan and lease losses (1,515) (1,419) (1,101) Accrued income and other assets 17,322 17,425 18,340 Discontinued assets 296 384 492 Total assets $ 187,111 $ 192,011 $ 186,378 LIABILITIES Money market deposits $ 39,525 $ 1,146 2.90 % $ 34,539 $ 666 1.93 % $ 35,966 $ 52 .14 % Demand deposits 56,130 1,402 2.50 54,711 1,102 2.01 49,707 182 .37 Savings deposits 5,010 7 .14 6,343 3 .04 7,798 1 .01 Time deposits 16,497 752 4.56 13,794 551 4.00 4,347 44 Total interest-bearing deposits 117,162 3,307 2.82 109,387 2,322 2.12 97,818 279 .29 Federal funds purchased and securities sold under repurchase agreements 103 4 4.35 1,647 79 4.81 2,107 41 1.93 Bank notes and other short-term borrowings 2,984 164 5.49 5,890 308 5.24 2,963 90 3.02 Long-term debt (g) 17,279 1,187 6.87 20,983 1,305 6.22 14,915 475 3.19 Total interest-bearing liabilities 137,528 4,662 3.39 137,907 4,014 2.91 117,803 885 .75 Noninterest-bearing deposits 28,993 34,672 49,044 Accrued expense and other liabilities 4,886 5,167 4,309 Discontinued liabilities (f) 296 384 492 Total liabilities 171,703 178,130 171,648 EQUITY Total equity 15,408 13,881 14,730 Total liabilities and equity $ 187,111 $ 192,011 $ 186,378 Interest rate spread (TE) 1.42 % 1.46 % 2.40 % Net interest income (TE) and net interest margin (TE) $ 3,810 2.16 % $ 3,943 2.17 % $ 4,554 2.64 % Less: TE adjustment (b) 45 30 27 Net interest income, GAAP basis $ 3,765 $ 3,913 $ 4,527 (a) Results are from continuing operations. Interest excludes the interest associated with the liabilities referred to in (g) below, calculated using a matched funds transfer pricing methodology. (b) Interest income on tax-exempt securities and loans has been adjusted to a taxabale-equivalent basis using the statutory federal income tax rate in effect that calendar year. (c) For purposes of these computations, nonaccrual loans are included in average loan balances. (d) Commercial and industrial average loan balances include $215 million, $196 million, and $157 million of assets from commercial credit cards for the years ended December 31, 2024, December 31, 2023, and December 31, 2022, respectively. (e) Yield presented is calculated on the basis of amortized cost excluding fair value hedge basis adjustments. The average amortized cost for securities available for sale was $42.2 billion and $44.0 billion for the twelve months ended December 31, 2024, and December 31, 2023, respectively. Yield based on the fair value of securities available for sale was 3.08% and 2.10% for the twelve months ended December 31, 2024, and December 31, 2023, respectively. (f) A portion of long-term debt and the related interest expense is allocated to discontinued liabilities as a result of applying our matched funds transfer pricing methodology to discontinued operations. (g) Average balances presented are based on daily average balances over the respective stated period. 55 Table of contents Figure 2 shows how the changes in yields or rates and average balances from the prior year affected net interest income. The section entitled “Financial Condition” contains additional discussion about changes in earning assets and funding sources. Figure 2. Components of Net Interest Income Changes from Continuing Operations 2024 vs. 2023 Dollars in millions Average Volume Yield/ Rate Net Change (a) INTEREST INCOME Loans $ (568) $ 390 $ (178) Loans held for sale (2) 1 (1) Securities available for sale (13) 362 349 Held-to-maturity securities (36) 8 (28) Trading account assets 2 4 6 Short-term investments 401 (23) 378 Other investments (11) — (11) Total interest income (TE) (227) 742 515 INTEREST EXPENSE Money market deposits 107 373 480 Demand deposits 29 271 300 Savings deposits (1) 5 4 Time deposits 117 84 201 Total interest-bearing deposits 252 733 985 Federal funds purchased and securities sold under repurchase agreements (62) (13) (75) Bank notes and other short-term borrowings (159) 15 (144) Long-term debt (245) 127 (118) Total interest expense (214) 862 648 Net interest income (TE) $ (13) $ (120) $ (133) (a) The change in interest not due solely to volume or rate has been allocated in proportion to the absolute dollar amounts of the change in each. Provision for credit losses Our provision for credit losses was a net charge of $335 million for 2024, compared to $489 million for 2023. The decrease in our provision for credit losses was driven by reserve releases, partly offset by higher net charge-offs. The net reserve release in 2024 was driven by changes in the economic outlook and planned balance sheet optimization efforts, which offset reserve increases attributable to asset quality migration. The higher net charge-offs were largely driven by the commercial and industrial portfolio. 56 Table of contents Noninterest income Noninterest income for 2024 was $809 million, inclusive of the $1.8 billion loss from the investment portfolio repositioning, compared to $2.5 billion during 2023. Noninterest income represented 18% of total revenue for 2024 and 39% of total revenue for 2023. The following discussion explains the composition of certain elements of our noninterest income and the factors that caused those elements to change. Figure 3. Noninterest Income 57 Table of contents Trust and investment services income Trust and investment services income consists of brokerage commissions, trust and asset management fees, and insurance income. The assets under management or administration that primarily generate these revenues are shown in Figure 4. For 2024, trust and investment services income increased $41 million, or 7.9%. This was primarily due to an increase in investment management income and other fees stemming from increased assets under management. A significant portion of our trust and investment services income depends on the value and mix of assets under management. At December 31, 2024, our bank, trust, and registered investment advisory subsidiaries had assets under management or administration of $61.4 billion, compared to $54.9 billion at December 31, 2023. The increase from 2023 to 2024 was attributable to movements in the market and net new business. Figure 4. Assets Under Management or Administration Year ended December 31, Change 2024 vs. 2023 Dollars in millions 2024 2023 Amount Percent Discretionary assets under management by investment type: Equity $ 34,541 $ 30,724 $ 3,817 12.4 % Fixed income 13,942 13,775 167 1.2 Money market 6,785 6,187 598 9.7 Total discretionary assets under management $ 55,268 $ 50,686 $ 4,582 9.0 % Non-discretionary assets under administration 6,093 4,173 1,920 46.0 Total $ 61,361 $ 54,859 $ 6,502 11.9 % Investment banking and debt placement fees Investment banking and debt placement fees consist of syndication fees, debt and equity securities underwriting fees, merger and acquisition and debt placement advisor fees, gains on sales of commercial mortgages, and agency origination fees. For 2024, investment banking and debt placement fees increased $146 million, or 26.9%, from the prior year reflective of growth across all products excluding commercial mortgage activity. Service charges on deposit accounts Service charges on deposit accounts decreased $9 million, or 3.3%, in 2024 compared to the prior year. This decrease was driven by lower overdraft, maintenance, and service fees, offset slightly by higher account analysis fees. Cards and payments income Cards and payments income, which consists of debit card, consumer and commercial credit card, and merchant services income decreased $9 million, or 2.6%, in 2024 compared to 2023, driven by a decrease in debit interchange fees, partially offset by an increase in card reward costs. Other noninterest income Other noninterest income includes operating lease income and other leasing gains, corporate services income, corporate-owned life insurance income, consumer mortgage income, commercial mortgage servicing fees, net securities gains (losses), and other income. Other noninterest income decreased $1.8 billion in 2024 compared to 2023, primarily attributable to approximately $1.8 billion in losses on the sales of securities available for sale as part of portfolio repositioning activity during the third and fourth quarters of 2024. Excluding the impact of the repositioning activity, other noninterest income was relatively flat, increasing $3 million, reflecting an increase in commercial mortgage servicing fees offset by decreases in operating lease income and corporate services income. Noninterest expense Noninterest expense for 2024 was $4.5 billion, compared to $4.7 billion for 2023. Figure 5 gives a breakdown of our major categories of noninterest expense as a percentage of total noninterest expense for the twelve months ended December 31, 2024. 58 Table of contents The following discussion explains the composition of certain elements of our noninterest expense and the factors that caused those elements to change. Figure 5. Noninterest Expense (a) Other noninterest expense includes equipment, operating lease expense, marketing, intangible asset amortization and other miscellaneous expense. See the "Consolidated Statements of Income" in Part II, Item 8. Financial Statements and Supplementary Data of this report. Personnel As shown in Figure 6, personnel expense, the largest category of our noninterest expense, increased by $54 million, or 2.0%, in 2024 compared to 2023. Overall activity for the year was driven by higher incentive compensation from strong capital markets activity during the year, partially offset by a decrease in severance expense. Salaries and contract labor were down reflecting a decrease in FTE’s, offset slightly by increased contract labor costs. Figure 6. Personnel Expense Year ended December 31, Dollars in millions Change 2024 vs. 2023 2024 2023 Amount Percent Salaries and contract labor $ 1,609 $ 1,649 $ (40) (2.4) % Incentive and stock-based compensation (a) 661 525 136 25.9 Employee benefits 442 405 37 9.1 Severance 2 81 (79) N/M Total personnel expense $ 2,714 $ 2,660 $ 54 2.0 % N/M - Not meaningful (a) Excludes directors’ stock-based compensation of $4 million in 2024 and $3 million in 2023, reported as “other noninterest expense” in Figure 5. 59 Table of contents Non-personnel expense In total, other non-personnel expense decreased $243 million, or 11.7%, in 2024 compared to 2023 primarily due to items impacting non-personnel expense in 2023, including a $190 million FDIC special assessment charge, as well as corporate real estate related rationalization costs recorded within other expense. Income taxes We recorded a tax benefit from continuing operations of $143 million for 2024, compared to tax expense of $196 million for 2023. The effective tax rate, which is the provision for income taxes as a percentage of income from continuing operations before income taxes, was 46.6% for 2024 and 16.9% for 2023. The tax benefit recorded and increased effective tax rate for the year resulted primarily from the $1.8 billion loss on the sales of securities incurred as part of a strategic repositioning of our securities portfolio. In 2024, our federal tax expense and effective tax rate differ from the amount that would be calculated using the federal statutory tax rate primarily due to investments in tax-advantaged assets, such as corporate-owned life insurance, and tax credits associated with low-income housing investments, and periodic adjustments to our tax reserves as described in Note 14 (“Income Taxes”). Business Segment Results This section summarizes the financial performance of our two major business segments (operating segments): Consumer Bank and Commercial Bank. Note 25 (“Business Segment Reporting”) describes the products and services offered by each of these business segments and provides more detailed financial information pertaining to the segments. Dollars in the charts are presented in millions. Consumer Bank Segment imperatives • Execute a relationship-oriented growth strategy, which will enable us to grow (i) stable, low-cost deposits and (ii) valuable fee income streams, including wealth management and cards and payments • Simplify our business to improve execution and efficiency while managing risk • Meet the needs of our clients and communities in markets where we operate Market and business overview As the banking industry moves forward, so do our clients. Anticipating our clients’ needs not only today, but also for tomorrow and into the future, has become one of the biggest challenges for the banking industry. We view these challenges as an opportunity to help our current client base meet their own goals, as well as attract new and diverse clients. Key Consumer Bank’s focus on durable, long-term client relationships centered in core checking has been evident through the execution of our strategic priorities through focus areas such as developing a core Consumer relationship product suite and driving long-term deposits and fee income through new and enhanced products and services. Key continues to adapt to an increasingly digital world with an increased focus on client experience across our online banking channels. The advice our bankers provide, in combination with our products, services and digital platforms, place Key in a strong position to develop long-lasting and meaningful relationships with our current and prospective clients. Our goal is to help our clients move forward on their financial journeys and to be by their sides along the way. Summary of operations • Net income attributable to Key of $283 million in 2024, compared to $202 million in 2023, an increase of 40.1%, largely driven by favorable rates on deposits and lower FDIC special assessment charges • Taxable-equivalent net interest income increased in 2024 by $67 million, or 3.0%, from the prior year, due to favorable rates on deposits • Average loans and leases decreased in 2024 by $3.0 billion, or 7.3%, from the prior year, driven by broad-based declines across all loan categories • Average deposits increased in 2024 by $3.1 billion, or 3.7%, from the prior year, driven by growth in retail deposits, particularly in money market deposit accounts and certificates of deposit 60 Table of contents • Provision for credit losses increased $15 million in 2024 compared to the prior year, driven by higher net charge-offs, partly offset by a reserve release due to changes in the portfolio and economic conditions • Noninterest income decreased in 2024 by $12 million, or 1.3%, driven by decreases in cards and payments income and service charges on deposit accounts • Noninterest expense decreased in 2024 by $67 million, or 2.4%, primarily reflective of lower FDIC special assessment charges Commercial Bank Segment imperatives • Solve complex client needs through a differentiated product set of banking and capital markets capabilities • Drive targeted scale through distinct product capabilities delivered to a broad set of clients • Utilize industry expertise and broad capabilities to build relationships with narrowly targeted client sets 61 Table of contents Market and business overview Building relationships and delivering complex solutions for middle market clients requires a distinctive operating model that understands their business and can provide a broad set of product capabilities. As competition for these clients intensifies, we have positioned the business to maintain and grow our competitive advantage by building targeted scale in businesses and client segments. Strong market share in businesses such as real estate loan servicing and equipment finance highlights our ability to successfully meet customer needs through targeted scale in distinct product capabilities. Clients expect us to understand every aspect of their business. Our seven industry verticals are aligned to drive targeted scale in segments where we have a breadth of industry expertise. Our business model is positioned to meet our client needs because our focus is not on being a universal bank, but rather being the right bank for our clients. Summary of operations • Net income attributable to Key of $1.1 billion in 2024, compared to $885 million in 2023, an increase of 23.3%, largely driven by an increase in investment banking and debt placement fees and commercial mortgage servicing income, along with lower FDIC assessment charges • Taxable equivalent net interest income decreased in 2024 by $61 million, or 3.3%, from the prior year, primarily driven by a reduction in loan balances • Average loan and lease balances decreased $7.3 billion in 2024, or 9.6%, driven by a decline in commercial and industrial loans • Average deposit balances increased $3.0 billion in 2024, or 5.4%, driven by our focus on growing deposits across our commercial businesses • Provision for credit losses decreased $152 million in 2024 compared to the prior year, resulting from reserve releases due to changes in the portfolio and economic conditions, partially offset by higher net charge-offs • Noninterest income increased $198 million in 2024, or 13.8%, from the prior year, driven by growth in investment banking and debt placement fees and commercial mortgage servicing income • Noninterest expense increased by $28 million in 2024, or 1.6%, from the prior year, primarily due to increases in incentive compensation and other personnel expenses, partially offset by decreases in FDIC special assessment charges and operating lease expenses 62 Table of contents Financial Condition Loans and loans held for sale Figure 7. Breakdown of Loans as of December 31, 2024 (a) Other consumer loans include Consumer loans and Credit cards. See Note 4 (“Loan Portfolio”) Item 8. Financial Statements of this report. Figure 8 shows the composition of our loan portfolio at December 31 for each of the past two years. Figure 8. Composition of Loans 2024 2023 December 31, Dollars in millions Amount Percent of Total Amount Percent of Total COMMERCIAL Commercial and industrial (a) $ 52,909 50.7 % $ 55,815 49.6 % Commercial real estate: Commercial mortgage 13,310 12.8 15,187 13.5 Construction 2,936 2.8 3,066 2.7 Total commercial real estate loans 16,246 15.6 18,253 16.2 Commercial lease financing (b) 2,736 2.6 3,523 3.1 Total commercial loans 71,891 68.9 77,591 68.9 CONSUMER Real estate — residential mortgage 19,886 19.1 20,958 18.6 Home equity loans 6,358 6.1 7,139 6.4 Other consumer loans 5,167 5.0 5,916 5.2 Credit cards 958 0.9 1,002 0.9 Total consumer loans 32,369 31.1 35,015 31.1 Total loans (c) $ 104,260 100.0 % $ 112,606 100.0 % (a) Loan balances include $212 million and $207 million, of commercial credit card balances at December 31, 2024, and December 31, 2023, respectively. (b) Commercial lease financing includes receivables held as collateral for a secured borrowing of $3 million and $7 million at December 31, 2024, and December 31, 2023, respectively. Principal reductions are based on the cash payments received from these related receivables. Additional information pertaining to this secured borrowing is included in Note 20 (“Long-Term Debt”). (c) Total loans exclude loans of $257 million at December 31, 2024, and $339 million at December 31, 2023, related to the discontinued operations of the education lending business. 63 Table of contents At December 31, 2024, total loans outstanding from continuing operations were $104.3 billion, compared to $112.6 billion at the end of 2023. For more information on balance sheet carrying value, see Note 1 (“Summary of Significant Accounting Policies”) under the headings “Loans” and “Loans Held for Sale.” Commercial loan portfolio Commercial loans outstanding were $71.9 billion at December 31, 2024, a decrease of $5.7 billion, or 7.3%, compared to December 31, 2023, primarily reflecting declines in commercial and industrial loans and commercial mortgage real estate loans. Figure 9 provides our commercial loan portfolio by industry classification as of December 31, 2024, and December 31, 2023. Figure 9. Commercial Loans by Industry December 31, 2024 Commercial and industrial Commercial real estate Commercial lease financing Total commercial loans Percent of total Dollars in millions Industry classification: Agriculture $ 875 $ 99 $ 80 $ 1,054 1.5 % Automotive 2,173 673 2 2,848 4.0 Business services 2,899 262 81 3,242 4.5 Commercial real estate 7,799 11,909 3 19,711 27.4 Construction materials and contractors 1,839 258 203 2,300 3.2 Consumer goods 3,556 533 190 4,279 5.9 Consumer services 4,127 616 328 5,071 7.1 Equipment 1,740 159 137 2,036 2.8 Finance 10,103 99 209 10,411 14.5 Healthcare 2,707 1,204 210 4,121 5.7 Materials and extraction 2,135 196 134 2,465 3.4 Oil and gas 1,950 28 10 1,988 2.8 Public exposure 1,961 7 387 2,355 3.3 Technology, media, and telecom 521 10 44 575 .8 Transportation 849 127 291 1,267 1.8 Utilities 7,279 6 422 7,707 10.7 Other 396 60 5 461 .6 Total $ 52,909 $ 16,246 $ 2,736 $ 71,891 100.0 % December 31, 2023 Commercial and industrial Commercial real estate Commercial lease financing Total commercial loans Percent of total Dollars in millions Industry classification: Agriculture $ 925 $ 114 $ 74 $ 1,113 1.4 % Automotive 2,153 833 4 2,990 3.9 Business services 3,387 243 112 3,742 4.8 Commercial real estate 8,229 13,113 8 21,350 27.5 Construction materials and contractors 2,311 292 265 2,868 3.7 Consumer goods 3,851 622 268 4,741 6.1 Consumer services 4,568 774 327 5,669 7.3 Equipment 2,405 171 168 2,744 3.5 Finance 8,908 104 284 9,296 12.0 Healthcare 3,222 1,456 303 4,981 6.4 Materials and extraction 2,402 304 152 2,858 3.7 Oil and gas 2,212 37 12 2,261 2.9 Public exposure 2,241 8 513 2,762 3.6 Technology, media, and telecom 807 11 78 896 1.2 Transportation 988 97 466 1,551 2.0 Utilities 6,418 6 459 6,883 8.9 Other 788 68 30 886 1.1 Total $ 55,815 $ 18,253 $ 3,523 $ 77,591 100.0 % Commercial and industrial . Commercial and industrial loans are the largest component of our loan portfolio, representing 51% of our total loan portfolio at December 31, 2024, and 50% at December 31, 2023. This portfolio is approximately 89% variable rate and consists of loans primarily to large corporate, middle market, and small business clients. Commercial and industrial loans totaled $52.9 billion at December 31, 2024, a decrease of $2.9 billion, or 5.2%, compared to December 31, 2023 . The decrease was broad-based and spread across most industry categories, reflecting our planned balance sheet optimization efforts. 64 Table of contents Commercial real estate loans . Our commercial real estate portfolio includes project loans primarily focused in market-rate and affordable multi-family housing loans, owner-occupied commercial and industrial operating company buildings, and community center grocer-anchored retail centers. These three commercial real estate segments make up 75% of our commercial real estate portfolio. Our non-owner-occupied portfolio is focused on operators of commercial real estate who not only utilize our loan products, but also our broader industry-focused products and services and provide consistent pipelines into our agency, CMBS, and other long-term market take out products. This focus ensures our relationship clients foster and build portfolios with stable, recurring cash flows, with adequate, balanced cash reserves to support our balance sheet exposures through the economic cycle. At December 31, 2024, commercial real estate loans totaled $16.2 billion, which includes $13.3 billion of mortgage loans and $2.9 billion of construction loans. Compared to December 31, 2023, this portfolio decreased $2.0 billion or 11.0%, driven mainly by decreases in nonowner-occupied. Since the global financial crisis in 2008, we have limited our construction business and reduced our overall construction loans from 42% to 18% of commercial real estate loans as of December 31, 2024. Construction loans provide a stream of funding for properties not fully leased at origination to support debt service payments over the term of the contract or project. As of December 31, 2024, 82% of our construction portfolio are multi-family project loans. Our office exposure only represents 5% of commercial real estate loans at period end. As shown in Figure 10, our commercial real estate loan portfolio includes various property types and geographic locations of the underlying collateral. These loans include commercial mortgage and construction loans in both Consumer Bank and Commercial Bank. 65 Table of contents Figure 10. Commercial Real Estate Loans Geographic Region Dollars in millions West Southwest Central Midwest Southeast Northeast National Total Percent of Total Construction Commercial Mortgage December 31, 2024 Nonowner-occupied: Data Center $ — $ — $ — $ 98 $ 54 $ — $ — $ 152 .9 % $ — $ 152 Diversified 1 — — 3 — 13 118 135 .8 — 135 Industrial 44 1 95 103 214 258 18 733 4.5 54 679 Land & Residential 10 7 3 7 — 21 — 48 .3 28 20 Lodging 48 — 12 14 46 55 59 234 1.4 — 234 Medical Office 35 43 42 — 37 97 17 271 1.7 — 271 Multifamily 1,303 485 1,201 1,204 2,325 1,336 156 8,010 49.3 2,405 5,605 Office 152 1 129 77 134 232 13 738 4.5 — 738 Retail 152 6 81 172 97 293 79 880 5.4 43 837 Self Storage 44 — 44 8 222 18 24 360 2.2 14 346 Senior Housing 172 39 97 85 54 142 4 593 3.7 154 439 Skilled Nursing — — — — 132 170 90 392 2.4 — 392 Student Housing 41 — 13 63 123 — — 240 1.5 50 190 Other 1 10 7 112 40 48 — 218 1.3 — 218 Total nonowner-occupied 2,003 592 1,724 1,946 3,478 2,683 578 13,004 80.0 2,748 10,256 Owner-occupied 1,078 — 330 601 182 1,051 — 3,242 20.0 188 3,054 Total $ 3,081 $ 592 $ 2,054 $ 2,547 $ 3,660 $ 3,734 $ 578 $ 16,246 100.0 % $ 2,936 $ 13,310 Nonowner-occupied: Nonperforming loans $ 5 $ — $ 64 $ 80 $ 81 $ 13 $ — $ 243 N/M $ — $ 243 Accruing loans past due 90 days or more 10 — 2 1 — 7 — 20 N/M 4 16 Accruing loans past due 30 through 89 days 1 — — 3 19 9 — 32 N/M — 32 December 31, 2023 Nonowner-occupied: Data Center $ — $ — $ — $ — $ — $ — $ — $ — — % $ — $ — Diversified 3 — — 3 — 16 164 186 1.0 — 186 Industrial 58 24 80 110 230 280 20 802 4.4 168 634 Land & Residential 5 3 3 5 3 21 — 40 .2 18 22 Lodging 48 — 3 4 46 66 55 222 1.2 5 217 Medical Office 37 — 42 1 21 97 75 273 1.5 27 246 Multifamily 1,237 552 1,271 1,272 2,707 1,370 444 8,853 48.5 2,389 6,464 Office 142 — 153 76 118 285 50 824 4.5 — 824 Retail 213 6 84 183 102 297 213 1,098 6.0 75 1,023 Self Storage 62 — 45 15 72 32 171 397 2.2 4 393 Senior Housing 124 22 143 88 65 120 213 775 4.2 126 649 Skilled Nursing — — — 66 — 202 215 483 2.6 — 483 Student Housing — — — 27 158 — — 185 1.0 59 126 Other 1 12 8 35 37 67 160 320 1.8 — 320 Total nonowner-occupied 1,930 619 1,832 1,885 3,559 2,853 1,780 14,458 79.2 2,871 11,587 Owner-occupied 1,141 1 414 720 167 1,352 — 3,795 20.8 195 3,600 Total $ 3,071 $ 620 $ 2,246 $ 2,605 $ 3,726 $ 4,205 $ 1,780 $ 18,253 100.0 % $ 3,066 $ 15,187 Nonperforming loans $ 1 $ — $ 46 $ 1 $ 9 $ 5 $ 38 $ 100 N/M $ — $ 100 Accruing loans past due 90 days or more 1 — — 6 — 3 — 10 N/M — 10 Accruing loans past due 30 through 89 days 3 — 12 — 7 7 — 29 N/M — 29 West – Alaska, California, Hawaii, Idaho, Montana, Oregon, Washington, and Wyoming Southwest – Arizona, Nevada, and New Mexico Central – Arkansas, Colorado, Oklahoma, Texas, and Utah Midwest – Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, Nebraska, North Dakota, Ohio, South Dakota, and Wisconsin Southeast – Alabama, Delaware, Florida, Georgia, Kentucky, Louisiana, Maryland, Mississippi, North Carolina, South Carolina, Tennessee, Virginia, Washington, D.C., and West Virginia Northeast – Connecticut, Maine, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island, and Vermont National – Accounts in three or more regions Consumer loan portfolio Consumer loans outstanding at December 31, 2024, totaled $32.4 billion, a decrease of $2.6 billion, or 7.6%, from one year ago . The decrease was driven by declines across all consumer loan categories and reflect the higher interest rate environment and our focus on originating salable loans. The residential mortgage portfolio is comprised of loans originated by our Consumer Bank and is the largest segment of our consumer loan portfolio as of December 31, 2024, representing approximately 61% of consumer loans. This is followed by our home equity portfolio comprising approximately 20% of consumer loans outstanding at year end. 66 Table of contents We held the first lien position for approximately 65% of the home equity portfolio at December 31, 2024, and 64% at December 31, 2023. For loans with real estate collateral, we track borrower performance monthly. Regardless of the lien position, credit metrics are refreshed quarterly, including recent FICO scores as well as updated loan-to-value ratios. This information is used in establishing the ALLL. Our methodology is described in Note 1 (“Summary of Significant Accounting Policies”) under the heading “Allowance for Loan and Lease Losses”. Figure 11 presents our consumer loans by geography. Figure 11. Consumer Loans by State Dollars in millions Real estate — residential mortgage Home equity loans Consumer direct loans Credit cards Total December 31, 2024 Washington $ 4,312 $ 929 $ 214 $ 85 $ 5,540 Ohio 2,662 895 111 197 3,865 New York 723 1,756 737 330 3,546 Colorado 2,891 258 131 30 3,310 California 2,191 12 442 3 2,648 Oregon 1,195 532 92 40 1,859 Pennsylvania 403 449 333 60 1,245 Florida 733 41 384 13 1,171 Utah 805 232 56 18 1,111 Connecticut 684 223 105 28 1,040 Other 3,287 1,031 2,562 154 7,034 Total $ 19,886 $ 6,358 $ 5,167 $ 958 $ 32,369 December 31, 2023 Washington $ 4,520 $ 1,020 $ 227 $ 88 $ 5,855 Ohio 2,704 1,029 251 203 4,187 New York 805 1,993 775 347 3,920 Colorado 3,001 277 149 32 3,459 California 2,294 14 500 3 2,811 Oregon 1,269 585 108 43 2,005 Pennsylvania 445 517 379 63 1,404 Florida 782 42 416 14 1,254 Utah 851 252 64 18 1,185 Connecticut 765 255 113 29 1,162 Other 3,522 1,155 2,934 162 7,773 Total $ 20,958 $ 7,139 $ 5,916 $ 1,002 $ 35,015 67 Table of contents Loan sales As shown in Figure 12, during 2024, we sold $8.2 billion of our loans . Sales of loans classified as held for sale generated net gains of $120 million during 2024. Figure 12 summarizes our loan sales during 2024 and 2023. Figure 12. Loans Sold (Including Loans Held for Sale) Dollars in millions Commercial Commercial Real Estate Commercial Lease Financing Residential Real Estate Total 2024 Fourth quarter $ 150 $ 2,584 $ — $ 342 $ 3,076 Third quarter 60 1,406 90 393 1,949 Second quarter 56 860 61 312 1,289 First quarter 86 1,554 85 209 1,934 Total $ 352 $ 6,404 $ 236 $ 1,256 $ 8,248 2023 Fourth quarter $ 34 $ 1,735 $ 21 $ 340 $ 2,130 Third quarter 85 2,861 49 345 3,340 Second quarter 118 1,431 28 283 1,860 First quarter 125 1,121 164 135 1,545 Total $ 362 $ 7,148 $ 262 $ 1,103 $ 8,875 Figure 13 shows loans that are either administered or serviced by us but not recorded on the balance sheet; this includes loans that were sold. Figure 13. Loans Administered or Serviced December 31, Dollars in millions 2024 2023 2022 Commercial real estate loans $ 557,633 $ 499,449 $ 488,478 Residential mortgage 11,344 11,193 11,026 Education loans 189 248 312 Commercial lease financing 1,735 1,946 1,646 Commercial loans 603 667 723 Consumer direct 328 408 509 Consumer indirect 319 792 1,536 Total $ 572,151 $ 514,703 $ 504,230 In the event of default by a borrower, we are subject to recourse with respect to approximately $7.8 billion of the $572.2 billion of loans administered or serviced at December 31, 2024. These are primarily associated with commercial real estate loans administered or serviced. Additional information about this recourse arrangement is included in Note 22 (“Commitments, Contingent Liabilities, and Guarantees”) under the heading “Recourse agreement with FNMA.” We derive income from several sources when retaining the right to administer or service loans that are sold. We earn noninterest income (recorded as “Consumer mortgage income” and “Commercial mortgage servicing fees”) from fees for servicing or administering loans. This fee income is reduced by the amortization of related servicing assets. In addition, we earn interest income from investing funds generated by escrow deposits collected in connection with the servicing loans. Additional information about our mortgage servicing assets is included in Note 9 (“Mortgage Servicing Assets”). 68 Table of contents Maturities and sensitivity of certain loans to changes in interest rates Figure 14 shows the remaining maturities of our loan portfolio and the sensitivity of certain loans to changes in interest rates as of December 31, 2024. Figure 14. Remaining Maturities and Sensitivity of Certain Loans to Changes in Interest Rates (a) December 31, 2024 Dollars in millions Within One Year One - Five Years Five - Fifteen Years Over Fifteen Years Total Commercial Commercial and industrial $ 13,360 $ 35,689 $ 3,733 $ 127 $ 52,909 Commercial Mortgage 6,483 4,322 2,176 329 13,310 Real estate — construction 1,829 750 165 192 2,936 Commercial lease financing 181 1,586 969 — 2,736 Total commercial loans $ 21,853 $ 42,347 $ 7,043 $ 648 $ 71,891 Consumer Real estate - residential mortgage $ 183 $ 36 $ 678 $ 18,989 $ 19,886 Home equity loans 99 205 1,798 4,256 6,358 Other consumer loans 505 807 2,040 1,815 5,167 Credit Cards 958 — — — 958 Total consumer loans 1,745 1,048 4,516 25,060 32,369 Total loans $ 23,598 $ 43,395 $ 11,559 $ 25,708 $ 104,260 Loans with floating or adjustable interest rates (b) $ 37,592 $ 2,991 $ 12,385 $ 52,968 Loans with predetermined interest rates (c) 5,803 8,568 13,323 27,694 Total $ 43,395 $ 11,559 $ 25,708 $ 80,662 (a) Accrued interest of $456 million at December 31, 2024, is presented in "Accrued income and other assets" on the Consolidated Balance Sheets and is excluded from the amortized cost basis disclosed in this table. (b) Floating and adjustable rates vary in relation to other interest rates (such as the base lending rate) or a variable index that may change during the term of the loan. (c) Predetermined interest rates either are fixed or may change during the term of the loan according to a specific formula or schedule. Securities Our securities portfolio is constructed to store liquidity and help manage interest rate risk, including holding securities used to accommodate pledging requirements. Our securities portfolio totaled $45.1 billion at December 31, 2024, compared to $45.8 billion at December 31, 2023. Available-for-sale securities were $37.7 billion at December 31, 2024, compared to $37.2 billion at December 31, 2023. Held-to-maturity securities were $7.4 billion at December 31, 2024, compared to $8.6 billion at December 31, 2023. As shown in Figure 15, all of our mortgage-backed securities, which include both securities available-for-sale and held-to-maturity securities, are issued by government-sponsored enterprises or GNMA, and are traded in liquid secondary markets. These securities are recorded on the balance sheet at fair value for the available-for-sale portfolio and at cost for the held-to-maturity portfolio. For more information about these securities, see Note 6 (“Fair Value Measurements”) under the heading “Qualitative Disclosures of Valuation Techniques,” and Note 7 (“Securities”). Figure 15. Mortgage-Backed Securities by Issuer December 31, Dollars in millions 2024 2023 FHLMC & FNMA $ 14,291 $ 24,302 GNMA 21,573 11,665 Total (a) $ 35,864 $ 35,967 (a) Includes securities held in the available-for-sale and held-to-maturity portfolios. 69 Table of contents Securities available for sale The majority of our securities available-for-sale portfolio consists of federal agency mortgage-backed securities and CMOs. CMOs are debt securities secured by a pool of mortgages or mortgage-backed securities. In September 2024, we initiated a strategic repositioning of our securities available for sale portfolio by selling approximately $7.0 billion in market value of low-yielding mortgage-backed securities. The investment securities that were sold had a weighted average book yield of approximately 2.3% and an average duration of approximately six years. Reinvestment of the proceeds from the sale was completed in October 2024, with the new securities having an average book yield of approximately 4.95% and an average duration of approximately four years. During the third quarter of 2024, along with our customary sale of short-dated U.S. Treasuries set to mature within the quarter, we also sold approximately $3 billion in U.S. Treasuries yielding 50 basis points that were set to mature in the fourth quarter of 2024. In December 2024, we completed the strategic repositioning of our securities available-for-sale portfolio by selling an additional $3.0 billion of low-yielding investment securities and terminating approximately $3.0 billion of fair value hedges. The investment securities sold had a weighted average book yield of approximately 1.5% and an average duration of approximately eight years. Reinvestment of the proceeds from the sale was completed in December 2024, with the new securities having an average book yield of 5.5% and an average duration of approximately four years. Figure 16 shows the composition, TE yields, and remaining maturities of our securities available for sale. For more information about these securities, including gross unrealized gains and losses by type of security and securities pledged, see Note 7 (“Securities”). 70 Table of contents Figure 16. Securities Available for Sale Dollars in millions U.S. Treasury, Agencies, and Corporations Agency Residential Collateralized Mortgage Obligations (a) Agency Residential Mortgage-backed Securities (a) Agency Commercial Mortgage-backed Securities (a) Total Weighted-Average Yield (b) December 31, 2024 Remaining maturity: One year or less $ 2,585 $ 4 $ 6 $ 580 $ 3,175 3.93 % After one through five years 6,212 1,140 2,931 612 10,895 3.66 After five through ten years 40 6,073 6,934 2,358 15,405 3.29 After ten years 67 2,007 5,298 860 8,232 3.49 Fair value $ 8,904 $ 9,224 $ 15,169 $ 4,410 $ 37,707 Amortized cost (b) 8,928 11,409 16,038 4,927 41,302 3.48 % Weighted-average yield (c) 4.21 % 1.98 % 4.32 % 2.91 % 3.48 % — Weighted-average maturity 1.7 years 8.3 years 9.9 years 6.7 years 7.3 years — December 31, 2023 Fair value $ 9,026 $ 15,478 $ 3,589 $ 9,092 $ 37,185 — % Amortized cost 9,300 18,911 4,189 10,295 42,695 1.79 (a) Maturity is based upon expected average lives rather than contractual terms. (b) Excluded from the amortized cost of securities available for sale are basis adjustments for securities designated in active fair value hedges. Basis adjustments totaled $(6) million and $140 million as of December 31, 2024 and December 31, 2023, respectively. The securities being hedged are primarily U.S Treasuries, Agency RMBS, and Agency CMBS. (c) Weighted-average yields are calculated based on amortized cost. Such yields have been adjusted to a TE basis using the statutory federal income tax rate in effect that calendar year. Held-to-maturity securities The majority of our held-to-maturity portfolio consists of federal agency CMOs and mortgage-backed securities. The portfolio is also comprised of asset-backed securities and foreign bonds. Figure 17 shows the composition, yields, and remaining maturities of these securities. Figure 17. Held-to-Maturity Securities Dollars in millions Agency Residential Collateralized Mortgage Obligations (a) Agency Residential Mortgage-backed Securities (a) Agency Commercial Mortgage-backed Securities (a) Asset-backed securities (a) Other Securities Total Weighted-Average Yield (b) December 31, 2024 Remaining maturity: One year or less $ 35 $ — $ 41 $ 2 $ 7 $ 85 2.54 % After one through five years 1,160 101 1,221 304 19 2,805 3.05 After five through ten years 2,429 7 236 2 — 2,674 3.59 After ten years 953 43 835 — — 1,831 3.79 Amortized cost $ 4,577 $ 151 $ 2,333 $ 308 $ 26 $ 7,395 3.43 % Fair value 4,248 134 2,130 300 25 6,837 — Weighted-average yield (b) 3.78 % 2.82 % 2.94 % 2.09 % 4.17 % 3.43 % — Weighted-average maturity 7.2 years 7.1 years 8.3 years 1.4 years 1.9 years 7.3 years — December 31, 2023 Amortized cost $ 5,170 $ 165 $ 2,473 $ 738 $ 29 $ 8,575 3.49 % Fair value 4,896 152 2,270 709 29 8,056 — (a) Maturity is based upon expected average lives rather than contractual terms. (b) Weighted-average yields are calculated based on amortized cost. Such yields have been adjusted to a TE basis using the statutory federal income tax rate in effect that calendar year. 71 Table of contents Deposits and other sources of funds Figure 18. Breakdown of Deposits at December 31, 2024 The following presents the breakdown of our deposits by product for the noted periods. December 31, Dollars in billions 2024 2023 Money market deposits $ 41.0 $ 37.0 Demand deposits 57.6 57.7 Savings deposits 4.6 5.4 Time deposits 17.0 14.8 Noninterest bearing deposits 29.6 30.7 Total $ 149.8 $ 145.6 Our highly diversified deposit base is our primary source of funding. At December 31, 2024, our deposits totaled $149.8 billion, an increase of $4.2 billion, compared to December 31, 2023. The increase reflects our durable relationship-based business model, in addition to changing client behavior as a result of higher interest rates. Uninsured deposits totaled $64.4 billion and $61.5 billion at December 31, 2024 and December 31, 2023, respectively. Uninsured deposits are defined as the portion of deposit accounts in U.S. offices that exceed the FDIC insurance limit or similar state deposit insurance regimes and amounts in any other uninsured investment or deposit accounts that are classified as deposits and not subject to any federal or state deposit insurance regimes. Figure 19 presents estimated uninsured deposits for the noted periods which reflect amounts disclosed in KeyBank’s Call Report adjusted for intercompany deposits, which are not customer facing and are eliminated in consolidation, and accrued interest. 72 Table of contents Figure 19. Estimated Uninsured Deposits December 31, Dollars in billions 2024 2023 Uninsured deposits (a) $ 64.4 $ 61.5 Total deposits 149.8 145.6 Uninsured % of Deposits 43 % 42 % (a) Intercompany deposits and accrued interest excluded from uninsured deposits $ 12.4 $ 9.5 As of December 31, 2024 and December 31, 2023, approximately $12.3 billion and $13.1 billion, respectively, of uninsured deposits were collateralized by government-backed securities. Figure 20 presents the maturity distribution of estimated uninsured time deposits. Figure 20. Maturity Distribution of Uninsured Time Deposit Amounts December 31, Dollars in millions 2024 2023 Remaining maturity: Three months or less $ 575 $ 480 After three through six months 582 324 After six through twelve months 220 353 After twelve months 77 52 Total $ 1,454 $ 1,209 Wholesale funds, consisting of short-term borrowings and long-term debt, totaled $14.2 billion at December 31, 2024, compared to $22.6 billion at December 31, 2023. The decrease reflects our balance sheet optimization efforts, which reduced our need for wholesale borrowings. For more information regarding our wholesale funds, see Item 7. Management’s Discussion & Analysis of Financial Condition & Results of Operations under the heading “Risk Management - Liquidity risk management” of this report. Capital Our capital management objective is to maintain capital levels consistent with our risk appetite and of a sufficient amount to operate under a wide range of economic conditions. Our current capital levels position us well to execute against our capital priorities including supporting organic growth and paying dividends. The following sections discuss certain ways we have deployed our capital. For further information, see the Consolidated Statements of Changes in Equity and Note 24 (“Shareholders' Equity”). (a) Common Share repurchases were suspended during the second quarter of 2020 in response to the COVID-19 pandemic and resumed in the first quarter of 2021. Dividends Consistent with our capital plans, the Board declared a quarterly dividend of $.205 per Common Share for each of the four quarters of 2024. These quarterly dividend payments brought our annual dividend to $.82 per Common Share for 2024. Common Shares outstanding Our Common Shares are traded on the NYSE under the symbol KEY with 27,154 holders of record at December 31, 2024. Our book value per Common Share was $14.21 based on 1.1 billion shares outstanding at 73 Table of contents December 31, 2024, compared to $13.02 based on 936.6 million shares outstanding at December 31, 2023. At December 31, 2024, our tangible book value per Common Share was $11.70, compared to $10.02 at December 31, 2023. Figure 21 shows activities that caused the change in our outstanding Common Shares over the past two years. Figure 21. Changes in Common Shares Outstanding 2024 Quarters In thousands 2024 Fourth Third Second First 2023 Shares outstanding at beginning of period 936,564 991,251 943,200 942,776 936,564 933,325 Open market share repurchases — — — — — (2,550) Shares issued under employee compensation plans (net of cancellations and returns) 7,351 493 222 424 6,212 5,789 Shares issued under Scotiabank investment agreement 162,871 115,042 47,829 — — — Shares outstanding at end of period 1,106,786 1,106,786 991,251 943,200 942,776 936,564 During 2024, Common Shares outstanding increased by 170.2 million shares, primarily driven by issuances under the Scotiabank investment agreement. For more information on share activity, see Note 24 (“Shareholders' Equity”). At December 31, 2024, we had 149.9 million treasury shares, compared to 320.1 million treasury shares at December 31, 2023. The decrease in treasury shares during the year was primarily attributable to the issuance of 162.9 million shares to Scotiabank in connection with the strategic minority investment. Going forward, we expect to reissue treasury shares as needed in connection with stock-based compensation awards and for other corporate purposes. Capital adequacy Capital adequacy is an important indicator of financial stability and performance. All of our capital ratios remained in excess of regulatory requirements at December 31, 2024. Our capital and liquidity levels are intended to position us to weather an adverse operating environment while continuing to serve our clients’ needs, as well as to meet the Regulatory Capital Rules described in the “Supervision and regulation” section of Item 1 of this report. Our shareholders’ equity to assets ratio was 9.7% at December 31, 2024, compared to 7.8% at December 31, 2023. Our tangible common equity to tangible assets ratio was 7.0% at December 31, 2024, compared to 5.1% at December 31, 2023. The minimum capital and leverage ratios under the Regulatory Capital Rules together with the estimated ratios of KeyCorp at December 31, 2024, calculated on a fully phased-in basis, are set forth under the heading “Basel III” in the “Supervision and Regulation” section in Item 1 of this report. Figure 22 represents the details of our regulatory capital positions at December 31, 2024, and December 31, 2023, under the Regulatory Capital Rules. Information regarding the regulatory capital ratios of KeyCorp’s banking subsidiaries is presented in Note 24 (“Shareholders' Equity”). 74 Table of contents Figure 22. Capital Components and Risk-Weighted Assets December 31, Dollars in millions 2024 2023 COMMON EQUITY TIER 1 Key shareholders’ equity (GAAP) $ 18,176 $ 14,637 Less: Preferred Stock (a) 2,446 2,446 Add: CECL phase-in (b) 59 118 Common Equity Tier 1 capital before adjustments and deductions 15,789 12,309 Less: Goodwill, net of deferred taxes 2,574 2,594 Intangible assets, net of deferred taxes 24 49 Deferred tax assets 172 1 Net unrealized gains (losses) on available-for-sale securities, net of deferred taxes (2,729) (4,296) Accumulated gains (losses) on cash flow hedges, net of deferred taxes (438) (656) Amounts in AOCI attributed to pension and postretirement benefit costs, net of deferred taxes (303) (277) Total Common Equity Tier 1 capital 16,489 14,894 TIER 1 CAPITAL Common Equity Tier 1 16,489 14,894 Additional Tier 1 capital instruments and related surplus 2,445 2,446 Less: Deductions — — Total Tier 1 capital 18,934 17,340 TIER 2 CAPITAL Tier 2 capital instruments and related surplus 1,767 2,020 Allowance for losses on loans and liability for losses on lending-related commitments (c) 1,635 1,668 Less: Deductions — — Total Tier 2 capital 3,402 3,688 Total risk-based capital $ 22,336 $ 21,028 RISK-WEIGHTED ASSETS Risk-weighted assets on balance sheet $ 105,047 $ 115,861 Risk-weighted off-balance sheet exposure 31,883 31,555 Market risk-equivalent assets 1,366 1,159 Gross risk-weighted assets 138,296 148,575 Less: Excess allowance for loan and lease losses — — Net risk-weighted assets $ 138,296 $ 148,575 AVERAGE QUARTERLY TOTAL ASSETS $ 188,855 $ 191,948 CAPITAL RATIOS Tier 1 risk-based capital 13.69 % 11.67 % Total risk-based capital 16.15 14.15 Leverage (d) 10.03 9.03 Common Equity Tier 1 11.92 10.02 (a) Net of capital surplus. (b) Amount reflects our decision to adopt the CECL transitional provision. (c) The ALLL included in Tier 2 capital is limited by regulation to 1.25% of the institution’s standardized total risk-weighted assets (excluding its standardized market risk-weighted assets). The ALLL includes $13 million and $16 million of allowance classified as “discontinued assets” on the balance sheet at December 31, 2024, and December 31, 2023, respectively. (d) This ratio is Tier 1 capital divided by average quarterly total assets as defined by the Federal Reserve less: (i) goodwill, (ii) the disallowed intangible and deferred tax assets, and (iii) other deductions from assets for leverage capital purposes. Off-Balance Sheet Arrangements Off-balance sheet arrangements We are party to various types of off-balance sheet arrangements, which could lead to contingent liabilities or risks of loss that are not reflected on the balance sheet. Variable interest entities In accordance with the applicable accounting guidance for consolidations, we consolidate a VIE if we have: (i) a variable interest in the entity; (ii) the power to direct activities of the VIE that most significantly impact the entity’s economic performance; and (iii) the obligation to absorb losses of the entity or the right to receive benefits from the entity that could potentially be significant to the VIE (i.e., we are considered to be the primary beneficiary). Additional information regarding the nature of VIEs and our involvement with them is included in Note 1 (“Summary of Significant Accounting Policies”) under the heading “Principles of Consolidation and Basis of Presentation” and in Note 13 (“Variable Interest Entities”). 75 Table of contents Commitments to extend credit or funding Loan commitments provide for financing on predetermined terms as long as the client continues to meet specified criteria. These commitments generally carry variable rates of interest and have fixed expiration dates or other termination clauses. We typically charge a fee for our loan commitments. Since a commitment may expire without resulting in a loan or being fully utilized, the total amount of an outstanding commitment may significantly exceed any related cash outlay. Further information about our loan commitments at December 31, 2024, is presented in Note 22 (“Commitments, Contingent Liabilities, and Guarantees”) under the heading “Commitments to Extend Credit or Funding.” Other off-balance sheet arrangements Other off-balance sheet arrangements include financial instruments that do not meet the definition of a guarantee in accordance with the applicable accounting guidance, and other relationships, such as liquidity support provided to asset-backed commercial paper conduits, indemnification agreements and intercompany guarantees. Information about such arrangements is provided in Note 22 under the heading “Other Off-Balance Sheet Risk.” Guarantees We are a guarantor in various agreements with third parties. As guarantor, we may be contingently liable to make payments to the guaranteed party based on changes in a specified interest rate, foreign exchange rate or other variable (including the occurrence or nonoccurrence of a specified event). These variables, known as underlyings, may be related to an asset or liability, or another entity’s failure to perform under a contract. Additional information regarding these types of arrangements is presented in Note 22 (“Commitments, Contingent Liabilities, and Guarantees”) under the heading “Guarantees.” Risk Management Overview Like all financial services companies, we engage in business activities and assume the related risks. The most significant risks we face are credit, compliance, operational, liquidity, market, reputation, strategic, and model risks. Our risk management activities are shown in the following chart, and we manage such risks across the entire enterprise to maintain safety and soundness and maximize profitability. Certain of these risks are defined and discussed in greater detail in the remainder of this section. Federal banking regulators continue to emphasize with financial institutions the importance of relating capital management strategy to the level of risk at each institution. We believe our internal risk management processes help us achieve and maintain capital levels that are commensurate with our business activities and risks, and 76 Table of contents conform to regulatory expectations. The table below depicts our risk management hierarchy and associated responsibilities and activities of each group. 77 Table of contents Group Overview and Responsibilities Activities Board of Directors – Oversight capacity – Oversees that Key’s risks are managed in a manner that is effective and balanced – Fiduciary duty to Key’s shareholders – Understands Key's risk philosophy – Approves the risk appetite – Inquires about risk practices – Reviews the portfolio of risks – Compares the actual risks to the risk appetite – Is apprised of significant risks, both actual and emerging, and determines whether management is responding appropriately – Challenges management and promotes accountability Board of Directors Audit Committee (a) – Assists the Board in oversight of financial statement integrity, regulatory and legal requirements, independent auditors’ qualifications and independence, and the performance of the internal audit function and independent auditors – Assists the Board in oversight of financial reporting, legal matters, and fraud risk – Meets with management and approves significant policies relating to the risk areas overseen by the Audit Committee – Receives reports on enterprise risk – Meets bi-monthly – Convenes to discuss the content of our financial disclosures and quarterly earnings releases Board of Directors Risk Committee (a) – Assists the Board in oversight of strategies, policies, procedures, and practices relating to the assessment and management of enterprise-wide risk, including credit, market, liquidity, model, operational, compliance, reputation, and strategic risks – Assists the Board in overseeing risks related to capital adequacy, capital planning, and capital actions – Reviews and provides oversight of management’s activities related to the enterprise-wide risk management framework, which includes an annual review of the ERM Policy, including the Risk Appetite Statement, and management and ERM reports – Approves any material changes to the charter of the ERM Committee and significant policies relating to risk management, including corporate risk tolerances for major risk categories ERM Committee – Chaired by the Chief Executive Officer and comprising the Chief Risk Officer and other senior level executives – Manage risk and ensure that the corporate risk profile is managed in a manner consistent with our risk appetite – Oversees the ERM Program, which encompasses our risk philosophy, policy, framework, and governance structure for the management of risks across the entire company – Approves and manages the risk-adjusted capital framework we use to manage risks Disclosure Committee – Includes representatives from each of the Three Lines of Defense – Meets quarterly to review recent internal and external events to determine whether all appropriate disclosures have been made in reports filed with the SEC – Convenes quarterly to discuss the content of our 10-Q and 10-K Tier 2 Risk Governance Committees – Includes attendees from each of the Three Lines of Defense – The First Line of Defense is the line of business primarily responsible to accept, own, proactively identify, monitor, and manage risk – The Second Line of Defense comprises Risk Management representatives who provide independent, centralized oversight over all risk categories by aggregating, analyzing, and reporting risk information – Risk Review, our internal audit function, provides the Third Line of Defense. Its role is to provide independent assessment and testing of the effectiveness of, appropriateness of, and adherence to KeyCorp’s risk management policies, practices, and controls – Supports the ERM Committee by identifying early warning events and trends, escalating emerging risks, and discussing forward-looking assessments Internal Audit – Provide the KeyCorp Board and management with independent, risk-based, and objective assurance, advice, insight, and foresight. – Conducts objective examinations of evidence for the purpose of providing independent assessments to the Audit Committee, management, and outside parties on the adequacy and effectiveness of business processes, risk management activities, internal controls, and governance processes for KeyCorp. (a) The Audit and Risk Committees meet jointly, as appropriate, to discuss matters that relate to each committee’s responsibilities. Committee chairpersons routinely meet with management during interim months to plan agendas for upcoming meetings and to discuss emerging trends and events that have transpired since the preceding meeting. All members of the Board receive formal reports designed to keep them abreast of significant developments during the interim months. Market risk management Market risk is the risk that movements in market risk factors, including interest rates, foreign exchange rates, equity prices, commodity prices, credit spreads, and volatilities will reduce Key’s income and the value of its portfolios. These factors influence prospective yields, values, or prices associated with the instrument. We are exposed to market risk both in our trading and nontrading activities, which include asset and liability management activities. Our risk management activities are focused on ensuring that we properly identify, measure, and manage such risks across the entire enterprise to maintain safety and soundness, and to maximize profitability. Information regarding our fair value policies, procedures, and methodologies is provided in Note 1 (“Summary of Significant Accounting Policies”) under the heading “Fair Value Measurements” and Note 6 (“Fair Value Measurements”) in this report. 78 Table of contents Trading market risk Key incurs market risk as a result of trading activities that are used in support of client facilitation and hedging activities, principally within our investment banking and capital markets businesses. Key has exposures to a wide range of risk factors including interest rates, equity prices, foreign exchange rates, credit spreads, and commodity prices, as well as the associated implied volatilities and spreads. Our primary market risk exposures are a result of trading and hedging activities in the derivative and fixed income markets, including securitization exposures. At December 31, 2024, we did not have any re-securitization positions. We maintain modest trading inventories to facilitate customer flow, make markets in securities, and hedge certain risks including but not limited to credit risk and interest rate risk. The risks associated with these activities are mitigated in accordance with the Market Risk hedging policy. The majority of our positions are traded in active markets. Governance structure - Trading market risk Market risk management is an integral part of Key’s risk culture. The Risk Committee of our Board provides oversight of trading market risks. The ERM Committee and the Market Risk Committee regularly review and discuss market risk exposures and results of monitoring activities. Market risk policies and procedures have been defined and take into account our tolerance for risk and consideration for the business environment. The Market Risk Committee approves market risk policies and recommends our significant market risk policy to the ERM Committee, the KeyBank Board, and the Risk Committee of the Board for approval. MTRM, as the second line of defense, is an independent risk management function that partners with the lines of business to identify, measure, and monitor market risks throughout our company. MTRM is responsible for ensuring transparency of significant market risks, monitoring compliance with established limits, and escalating limit exceptions to appropriate senior management. The various business units and trading desks are responsible for ensuring that market risk exposures are well-managed and prudent. Market risk is monitored through various measures, such as VaR, and through routine stress testing, sensitivity, and scenario analyses. MTRM conducts stress tests for each position using historical worst case and standard shock scenarios. VaR, stressed VaR, and other analyses are prepared daily and distributed to appropriate management. Covered positions. We monitor the market risk of our covered positions as defined in the Market Risk Rule, which includes all of our trading positions as well as all foreign exchange and commodity positions, regardless of whether the position is in a trading account. Key’s covered positions may also include mortgage-backed and asset-backed securities that may be identified as securitization positions or re-securitization positions under the Market Risk Rule. MTRM as well as the LOB that trades securitization positions monitor the positions, the portfolio composition and the risks identified in this section on a daily basis consistent with the Market Risk policies and procedures. At December 31, 2024, covered positions did not include any re-securitization positions. Instruments that are used to hedge nontrading activities, such as bank-issued debt and loan portfolios, equity positions that are not actively traded, and securities financing activities, do not meet the definition of a covered position. MTRM is responsible for identifying our portfolios as either covered or non-covered. The Covered Position Working Group develops the final list of covered positions, and a summary is provided to the Market Risk Committee. Our significant portfolios of covered positions are detailed below. We analyze market risk by portfolios of covered positions and do not separately measure and monitor our portfolios by risk type. The descriptions below incorporate the respective risk types associated with each of these portfolios. • Fixed income includes those instruments associated with our capital markets business and the trading of securities as a dealer. These instruments may include positions in municipal bonds, bonds backed by the U.S. government, agency and corporate bonds, certain mortgage-backed and asset-backed securities, securities issued by the U.S. Treasury, money markets, and certain CMOs. The activities and instruments within the fixed income portfolio create exposures to interest rate and credit spread risks. • Interest rate derivatives include interest rate swaps, caps, and floors, which are transacted primarily to accommodate the needs of commercial loan clients. In addition, we enter into interest rate derivatives to offset or mitigate the interest rate risk related to the client positions. The activities within this portfolio create exposures to interest rate risk. VaR and stressed VaR. VaR is the estimate of the maximum amount of loss on an instrument or portfolio due to adverse market conditions during a given time interval within a stated confidence level. Stressed VaR is used to assess extreme conditions on market risk within our trading portfolios. MTRM calculates VaR and stressed VaR at 79 Table of contents various confidence levels and the results are closely monitored. VaR and stressed VaR results are also provided to our regulators and utilized in regulatory capital calculations. We use a historical simulation VaR model to measure the potential adverse effect of changes in interest rates, foreign exchange rates, equity prices, and credit spreads on the fair value of our covered positions and other non-covered positions. Historical moves in risk factors across various asset classes are incorporated in VaR metrics. Additional consideration is given to the risk factors to estimate the exposures that contain optionality features, such as options and cancellable provisions. VaR is calculated using daily observations over a one-year time horizon, and approximates a 95% confidence level. Statistically, this means that we would expect to incur losses greater than VaR, on average, five out of 100 trading days, or three to four times each quarter. We also calculate VaR and stressed VaR at a 99% confidence level. The VaR model is an effective tool in estimating ranges of possible gains and losses on our positions. However, there are limitations inherent in the VaR model since it uses historical results over a given time interval to estimate future performance. Historical results may not be indicative of future results, and changes in the market or composition of our portfolios could have a significant impact on the accuracy of the VaR model. We regularly review and enhance the modeling techniques, inputs, and assumptions used. Our market risk policy includes the independent validation of our VaR model by Key’s internal model validation group on an annual basis. The Model Risk Committee oversees the Model Validation Program, and results of validations are discussed with the ERM Committee. Actual losses for the total covered positions did not exceed aggregate daily VaR for any day during the quarters ended December 31, 2024, and December 31, 2023. MTRM backtests our VaR model on a daily basis to evaluate its predictive power. The test compares VaR model results at the 99% confidence level to daily held profit and loss. Results of back testing are provided to the Market Risk Committee. Backtesting exceptions occur when daily held profit and loss exceed VaR. We do not engage in correlation trading or utilize the internal model approach for measuring default and credit migration risk. Our net VaR approach incorporates diversification, but our VaR calculation does not include the impact of counterparty risk and our own credit spreads on derivatives. The aggregate VaR at the 99% confidence level with a one day holding period for all covered positions was $1.4 million at December 31, 2024, and $1.6 million at December 31, 2023. Figure 23 summarizes our VaR at the 99% confidence level with a one day holding period for significant portfolios of covered positions for the three months ended December 31, 2024, and December 31, 2023. Figure 23. VaR for Significant Portfolios of Covered Positions 2024 2023 Three months ended December 31, Three months ended December 31, Dollars in millions High Low Mean December 31, High Low Mean December 31, Trading account assets: Fixed income $ 1.3 $ .4 $ .9 $ .8 $ 1.3 $ .7 $ 1.1 $ 1.1 Derivatives: Interest rate $ .6 $ .4 $ .5 $ .5 $ .5 $ .3 $ .4 $ .4 Stressed VaR is calculated by running the portfolios through a predetermined stress period which is approved by the Market Risk Committee and is calculated at the 99% confidence level using the same model and assumptions used for general VaR. The aggregate stressed VaR for all covered positions was $5.2 million at December 31, 2024, and $4.0 million at December 31, 2023. Figure 24 summarizes our stressed VaR at the 99% confidence level with a one day holding period for significant portfolios of covered positions for the three months ended December 31, 2024, and December 31, 2023. The increase in stressed VaR is due to a change in the size and composition of our fixed income inventory. Figure 24. Stressed VaR for Significant Portfolios of Covered Positions 2024 2023 Three months ended December 31, Three months ended December 31, Dollars in millions High Low Mean December 31, High Low Mean December 31, Trading account assets: Fixed income $ 5.2 $ 1.3 $ 3.3 $ 4.8 $ 4.7 $ 1.9 $ 3.1 $ 3.6 Derivatives: Interest rate $ .4 $ .2 $ .3 $ .3 $ .4 $ .2 $ .3 $ .3 80 Table of contents Market risk is a component of our internal capital adequacy assessment. Our risk-weighted assets include a market risk-equivalent asset amount, which consists of a VaR component, stressed VaR component, a de minimis exposure amount, and a specific risk add-on including the securitization positions. The aggregate market value of the securitization positions as defined by the Market Risk Rule was $24 million at December 31, 2024, all of which were mortgage-backed security positions. Specific risk is the price risk of individual financial instruments, which is not accounted for by changes in broad market risk factors and is measured through a standardized approach. Market risk weighted assets, including the specific risk calculations, are run quarterly by MTRM in accordance with the Market Risk Rule, and approved by the Chief Market Risk Officer. Nontrading market risk Most of our nontrading market risk is derived from interest rate fluctuations and its impacts on our traditional loan and deposit products, as well as investments, hedging relationships, long-term debt, and certain short-term borrowings. Interest rate risk, which is inherent in the banking industry, is measured by the potential for fluctuations in net interest income and the EVE. Such fluctuations may result from changes in interest rates and differences in the repricing and maturity characteristics of interest-earning assets and interest-bearing liabilities. We manage the exposure to changes in net interest income and the EVE in accordance with our risk appetite and in accordance with the Board-approved ERM policy. Interest rate risk positions are influenced by a number of factors, including the balance sheet positioning that arises out of customer preferences for loan and deposit products, economic conditions, the competitive environment within our markets, changes in market interest rates that affect client activity, and our hedging, investing, funding, and capital positions. The primary components of interest rate risk exposure consist of reprice risk, yield curve risk, option risk, and basis risk. • “Reprice risk ” is the exposure to changes in the level of interest rates and occurs when the volume of interest-bearing liabilities and the volume of interest-earning assets they fund (e.g., deposits used to fund loans) do not mature or reprice at the same time. • “Yield curve risk” is the exposure to non-parallel changes in the slope of the yield curve (where the yield curve depicts the relationship between the yield on a particular type of security and its term to maturity) and occurs when interest-bearing liabilities and the interest-earning assets that they fund do not price or reprice to the same term point on the yield curve. • “Option risk” is the exposure to a customer or counterparty’s ability to take advantage of the interest rate environment and terminate or reprice one of our assets, liabilities, or off-balance sheet instruments prior to contractual maturity. Option risk occurs when exposures to customer and counterparty early withdrawals or prepayments are not mitigated with an offsetting position or appropriate compensation. • “Basis risk” is the exposure to asymmetrical changes in interest rate indexes and occurs when floating-rate assets and floating-rate liabilities reprice at the same time, but in response to different market factors or indexes. Governance structure - Nontrading market risk The management of nontrading market risk is centralized within Corporate Treasury. The Risk Committee of our Board provides oversight of nontrading market risk. The ERM Committee, the ALCO, and the Treasury Risk Oversight Committee (“TROC”) review reports on the interest rate risk exposures described above. In addition, the ALCO reviews reports on stress tests and sensitivity analyses related to interest rate risk. These committees have various responsibilities related to managing nontrading market risk, including recommending, approving, and monitoring strategies that maintain risk positions within approved tolerance ranges. The A/LM Policy provides the framework for the oversight and management of interest rate risk and is administered by the ALCO. MTRM, as the second line of defense, provides additional oversight. Net interest income simulation analysis. The primary tool we use to measure our interest rate risk is simulation analysis. For purposes of this analysis, we estimate our net interest income based on the current and projected composition of our on- and off-balance sheet positions, accounting for recent and anticipated trends in customer activity. The analysis also incorporates assumptions for the current and projected interest rate environments and balance sheet growth projections based on a most likely macroeconomic view. The modeling incorporates investment portfolio and swap portfolio balances consistent with management's desired interest rate risk positioning. The simulation model estimates the amount of net interest income at risk by simulating the change in net interest 81 Table of contents income that would occur if rates were to gradually increase or decrease from current levels over the next 12 months (subject to a floor on market interest rates at zero). Figure 25 presents the results of the simulation analysis at December 31, 2024, and December 31, 2023. At December 31, 2024, our simulated impact to changes in interest rates was relatively neutral. The exposure to declining rates has changed from (0.01)% as of December 31, 2023 to 0.15% as of December 31, 2024, as a result of the change in balance sheet mix and positioning. Tolerance levels for risk management require the development of remediation plans to maintain residual risk within tolerance if simulation modeling demonstrates that a gradual, parallel 200 basis point increase or 200 basis point decrease in interest rates over the next 12 months would adversely affect net interest income over the same period by more than 5.5%. Current modeled exposure is within Board-approved tolerances. If a tolerance level is breached and determined inconsistent with risk appetite, the development of a remediation plan is required to reduce exposure back to within tolerance. Figure 25. Simulated Change in Net Interest Income December 31, 2024 December 31, 2023 Basis point change assumption -200 200 -200 200 Tolerance level (5.50) % (5.50) % (5.50) % (5.50) % Interest rate risk assessment 0.15 % (0.39) % (0.01) % (2.08) % Simulation analyses produce an estimate of interest rate exposure based on assumption inputs within the model. Assumptions are tailored to the specific interest rate environment and validated on a regular basis. However, actual results may differ from those derived in simulation analyses due to unanticipated changes to the balance sheet composition, customer behavior, product pricing, market interest rates, changes in management’s desired interest rate risk positioning, investment, funding and hedging activities or repercussions from exogenous events . Regular stress tests and sensitivity analyses are performed on the model inputs that could materially change the resulting risk assessments. Assessments are performed using different yield curve shapes, including steepenings or flattenings of the curve, immediate changes in market interest rates, and changes in the relationship of money market interest rates. Assessments are also performed on changes to the following assumptions: loan and deposit balances, the pricing of deposits without contractual maturities, changes in lending spreads, prepayments on loans and securities, investment, funding and hedging activities, and liquidity and capital management strategies. The results of additional assessments indicate that net interest income could increase or decrease from the base simulation results presented in Figure 25. Net interest income is highly dependent on the timing, magnitude, frequency, and path of interest rate changes and the associated assumptions for deposit repricing relationships, lending spreads, and the balance behavior of transaction accounts. If fixed-rate assets increase by $1 billion, or fixed-rate liabilities decrease by $1 billion, then the potential benefit to declining rates would increase by approximately 23 basis points. A five percentage point increase or decrease in the interest-bearing deposit beta assumption changes the current simulation results by approximately 120 basis points. The current interest rate risk position could fluctuate to higher or lower levels of risk depending on the competitive environment and client behavior that may affect the actual volume, mix, maturity, and repricing characteristics of loan and deposit flows. Corporate Treasury discretionary activities related to funding, investing, and hedging may also change as a result of changes in customer business flows or changes in management’s desired interest rate risk positioning. As changes occur to both the configuration of the balance sheet and the outlook for the economy, management proactively evaluates hedging opportunities that may change our interest rate risk profile. Simulations are also conducted that measure the effect of changes in market interest rates in the second and third years of a three-year horizon. These simulations are conducted in a similar manner to those based on a 12-month horizon. To capture longer-term exposures, changes in the EVE are calculated as discussed in the following section. Economic value of equity modeling. EVE complements net interest income simulation analysis as it estimates risk exposure beyond 12-, 24-, and 36-month horizons. EVE modeling measures the extent to which the economic values of assets, liabilities, and off-balance sheet instruments may change in response to fluctuations in interest rates. EVE is calculated by subjecting the balance sheet to an immediate increase or decrease in interest rates, measuring the resulting change in the values of assets, liabilities, and off-balance sheet instruments, and comparing those amounts with the base case of the current interest rate environment. EVE policy limits are measured against a +/-200 basis point scenario subject to a floor on market interest rates at zero. This analysis is highly dependent 82 Table of contents upon assumptions applied to assets and liabilities with non-contractual maturities. Those assumptions are based on historical behaviors, as well as forward expectations. Remediation plans are similarly developed if this analysis indicates that our EVE will decrease by more than 15% in response to an immediate increase or decrease in interest rates. The position is within these guidelines as of December 31, 2024. Management of interest rate exposure. The results of the various interest rate risk analyses are used to formulate A/LM strategies to achieve the desired risk profile while managing to objectives for capital adequacy and liquidity risk exposures. Specifically, risk positions are managed by purchasing or selling securities, issuing term debt with floating or fixed interest rates, and using derivatives. Interest rate swaps and options are predominantly used, which modify the interest rate characteristics of certain assets and liabilities. Figure 26 shows all swap positions held for A/LM purposes. These positions are used to convert the contractual interest rate index of agreed-upon amounts of assets and liabilities (i.e., notional amounts) to another interest rate index. For example, fixed-rate debt is converted to a floating rate through a “receive fixed/pay variable” interest rate swap. The volume, maturity, and mix of portfolio swaps change frequently to reflect broader A/LM objectives and the balance sheet positions to be hedged. For more information about how interest rate swaps are used to manage our risk profile, see Note 8 (“Derivatives and Hedging Activities”). Figure 26. Portfolio Swaps and Options by Interest Rate Risk Management Strategy December 31, 2024 Weighted-Average December 31, 2023 Dollars in millions Notional Amount Fair Value Maturity (Years) Receive Rate Pay Rate Notional Amount Fair Value Receive fixed/pay variable — conventional loans $ 18,750 $ (442) 1.4 2.3 % 4.5 % $ 15,000 $ (641) Receive fixed/pay variable — conventional debt 9,818 (470) 3.5 2.6 4.5 8,976 (395) Receive fixed/pay variable — forward loans 19,200 (114) 3.1 3.8 4.5 4,000 (27) Receive fixed/pay variable — forward debt 950 (22) 9.2 3.8 4.5 1,411 (40) Pay fixed/receive variable — conventional debt 50 1 3.5 4.7 3.6 50 1 Pay fixed/receive variable — securities 9,405 5 2.8 4.5 4.1 8,655 (152) Total portfolio swaps $ 58,173 $ (1,042) (a) 2.7 3.2 % 4.4 % $ 38,092 $ (1,254) (a) Floors — forward purchased $ 3,250 $ 2 1.1 — % — % $ 3,250 $ 26 Floors — forward sold 3,250 (1) 1.1 — — 3,250 (11) Total floors $ 6,500 $ 1 — — % — % $ 6,500 $ 15 (a) Excludes accrued interest of $51 million and $58 million at December 31, 2024, and December 31, 2023, respectively. Liquidity risk management Liquidity risk, which is inherent in the banking industry, is measured by our ability to accommodate liability maturities and deposit withdrawals, meet contractual obligations, and fund new business opportunities at a reasonable cost, in a timely manner, and without adverse consequences. Liquidity management involves maintaining sufficient and diverse sources of funding to accommodate planned, as well as unanticipated, changes in assets and liabilities under both normal and adverse conditions. Governance structure We manage liquidity for all of our affiliates on a consolidated basis. This approach considers the funding sources available to each entity, as well as each entity’s capacity to manage through adverse conditions. The management of consolidated liquidity risk is centralized within Corporate Treasury. Oversight and governance is provided by the Board, the ERM Committee, the ALCO, the TROC, and the Chief Risk Officer. The Asset Liability Management Policy provides the framework for the oversight and management of liquidity risk and is administered by the ALCO. The Corporate Treasury Oversight group within MTRM, as the second line of defense, provides additional oversight. Our current liquidity risk management practices are in compliance with the Federal Reserve Board’s Enhanced Prudential Standards. The committees mentioned above regularly review liquidity and funding summaries, liquidity trends, peer comparisons, variance analyses, liquidity projections, internal liquidity stress tests, and goal tracking reports. The reviews generate a discussion of positions, trends, and directives on liquidity risk and shape a number of our decisions. When liquidity pressure is elevated, positions are monitored more closely and reporting is more intensive. 83 Table of contents To ensure that emerging issues are identified, we monitor an extensive set of systematic and idiosyncratic early warning indicators daily. Factors affecting liquidity Our liquidity could be adversely affected by both direct and indirect events. An example of a direct event would be a downgrade in our credit ratings by a rating agency. Examples of indirect events (events unrelated to us) that could impair our access to liquidity would be an act of terrorism or war, natural disasters, global pandemics, political events, or the default or bankruptcy of a major corporation, mutual fund, or hedge fund. Similarly, market speculation, or rumors about us or the banking industry in general, may adversely affect the cost and availability of normal funding sources. Our credit ratings at December 31, 2024, are shown in Figure 27. While we believe these credit ratings, under normal conditions in the capital markets, will enable KeyCorp or KeyBank to issue fixed income securities to investors, downgrades in our credit ratings could increase our cost of funds, trigger additional collateral or funding requirements, and decrease the number of investors and counterparties willing to lend to us. Figure 27. Credit Ratings December 31, 2024 Outlook Short-Term Borrowings Long-Term Deposits (a) Senior Long-Term Debt Subordinated Long-Term Debt Capital Securities Preferred Stock KEYCORP Standard & Poor’s Stable A-2 N/A BBB BBB- BB BB Moody’s Stable P-2 N/A Baa2 Baa2 Baa3 Ba1 Fitch Positive F2 N/A BBB+ N/A BB BB DBRS Stable R-1 (low) N/A A (low) BBB (high) BBB (high) BBB (low) KEYBANK Standard & Poor’s Stable A-2 N/A BBB+ BBB N/A N/A Moody’s Stable P-2 P-1/A2 Baa1 Baa2 N/A N/A Fitch Positive F2 F2/A- BBB+ BBB N/A N/A DBRS Stable R-1 (low) A A A (low) N/A N/A (a) P-1 rating assigned by Moody’s is specific to KeyBank’s short-term bank deposit ratings. F2 assigned by Fitch Ratings, Inc. is specific to KeyBank’s short-term deposit ratings. Managing liquidity risk Most of our liquidity risk is derived from our business model, which involves taking in deposits, many of which can be withdrawn at any time, and lending them out in the form of illiquid loan assets. The assessments of liquidity risk are measured under the assumption of normal operating conditions as well as under stressed environments. We manage these exposures in accordance with our risk appetite, and within Board-approved policy limits. We regularly monitor our liquidity position and funding sources and measure our capacity to obtain funds in a variety of hypothetical scenarios in an effort to maintain an appropriate mix of available and affordable funding. In the normal course of business, we perform a monthly internal liquidity stress test at the consolidated KeyCorp level. From time to time, we may conduct internal liquidity stress tests more frequently, and use assumptions to reflect the changed market environment. Our testing incorporates estimates for loan and deposit lives based on our historical studies. Internal liquidity stress tests analyze potential liquidity scenarios under various funding constraints and time periods. Ultimately, they determine the periodic effects that major direct and indirect events would have on our access to funding markets and our ability to fund our normal operations. To compensate for the effect of these assumed liquidity pressures, we consider alternative sources of liquidity and maturities over different time periods to project how funding needs would be managed. Our primary source of funding for KeyBank is customer deposits resulting in a consolidated loan-to-deposit ratio of 70% as of December 31, 2024 . If the cash flows needed to support operating and investing activities are not satisfied by deposit balances, we rely on wholesale funding or on-balance sheet liquid reserves. Conversely, excess cash generated by operating, investing, and deposit-gathering activities may be used to repay outstanding debt or invest in liquid assets. We maintain a Contingency Funding Plan that outlines the process for addressing a liquidity crisis. As part of the plan, we maintain on-balance sheet liquid reserves referred to as our liquid asset portfolio, which consists of high-quality liquid assets. During a problem period, that reserve could be used as a source of funding to provide time to develop and execute a longer-term strategy. Figure 28 shows our available contingent liquidity at December 31, 84 Table of contents 2024 and December 31, 2023. In 2024, our secured term borrowings decreased $8.5 billion from a reduction in FHLB borrowings. Figure 28. Available Contingent Liquidity December 31, Dollars in billions 2024 2023 Available contingent liquidity: Unpledged securities $ 25.5 $ 7.5 Net balances of federal funds sold and balances in our Federal Reserve account 17.4 10.7 Unused secured borrowing capacity at the Federal Reserve Bank of Cleveland 36.7 54.7 Unused secured borrowing capacity at the FHLB 18.9 13.6 Total $ 98.5 $ 86.5 Long-term liquidity strategy Our long-term liquidity strategy is to be predominantly funded by core deposits. However, we may use wholesale funds to sustain an adequate liquid asset portfolio, meet daily cash demands, and allow management flexibility to execute business initiatives. Key’s client-based relationship strategy provides for a strong core deposit base that, in conjunction with intermediate and long-term wholesale funds managed to a diversified maturity structure and investor base, supports our liquidity risk management strategy. We use the loan-to-deposit ratio as a metric to monitor these strategies. Our target loan-to-deposit ratio is around 80% (at December 31, 2024, our loan-to-deposit ratio was 70.3%), which we calculate as the sum of total loans, loans held for sale, and nonsecuritized discontinued loans divided by deposits. Liquidity programs We have several liquidity programs, which are described in Note 20 (“Long-Term Debt”), that are designed to enable KeyCorp and KeyBank to raise funds in the public and private debt markets. The proceeds from most of these programs can be used for general corporate purposes, including acquisitions. These liquidity programs are reviewed from time to time by the Board and are renewed and replaced as necessary. There are no restrictive financial covenants in any of these programs. KeyBank had no bank note issuances during 2024. At December 31, 2024, there was $20.0 billion available for issuance under the KeyBank Bank Note Program. Liquidity for KeyCorp The primary source of liquidity for KeyCorp is from subsidiary dividends, primarily from KeyBank. KeyCorp has sufficient liquidity when it can service its debt; support customary corporate operations and activities (including acquisitions); support occasional guarantees of subsidiaries’ obligations in transactions with third parties at a reasonable cost, in a timely manner, and without adverse consequences; and fund capital distributions in the form of dividends and share buybacks. We use a parent cash coverage months metric as the primary measure to assess parent company liquidity. The parent cash coverage months metric measures the number of months into the future where projected obligations can be met with the current quantity of liquidity. We generally issue term debt to supplement dividends from KeyBank to manage our liquidity position at or above our targeted levels. The parent company generally maintains cash and short-term investments in an amount sufficient to meet projected debt maturities over at least the next 24 months. At December 31, 2024, KeyCorp held $5.2 billion in cash and short-term investments, which we projected to be sufficient to meet our projected obligations, including the repayment of our maturing debt obligations for the periods prescribed by our risk tolerance. Typically, KeyCorp meets its liquidity requirements through regular dividends from KeyBank, supplemented with term debt. Federal banking law limits the amount of capital distributions that a bank can make to its holding company without prior regulatory approval. A national bank’s dividend-paying capacity is affected by several factors, including net profits (as defined by statute) for the two previous calendar years and for the current year, up to the date of dividend declaration. During 2024, KeyBank paid $750 million in cash dividends to KeyCorp, and during the fourth quarter of 2024, KeyBank paid no cash dividends to KeyCorp. KeyCorp issued debt of $1.0 billion in the first 85 Table of contents quarter of 2024. At December 31, 2024, KeyBank had no regulatory capacity to pay any dividends to KeyCorp without prior regulatory approval. Our liquidity position and recent activity Over the past 12 months, our liquid asset portfolio, which includes overnight and short-term investments, as well as unencumbered, high quality liquid securities held as protection against a range of potential liquidity stress scenarios, has increased primarily due to an increase in Key's cash position. The liquid asset portfolio continues to exceed the amount that we estimate would be necessary to manage through an adverse liquidity event by providing sufficient time to develop and execute a longer-term solution. On August 12, 2024, we entered into an Investment Agreement with Scotiabank pursuant to which Scotiabank agreed to make a strategic minority investment in KeyCorp of approximately $2.8 billion, representing approximately 14.9% pro forma common stock ownership of KeyCorp, for a fixed price of $17.17 per share. On August 30, 2024, Scotiabank completed the initial purchase of 47,829,359 of our Common Shares with an investment of approximately $821 million in gross proceeds. On December 13, 2024, we announced that all necessary bank regulatory approvals had been received for completion of Scotiabank’s strategic minority investment in KeyCorp. On December 27, 2024, Scotiabank completed the final purchase of 115,042,316 of our Common Shares, contemplated under the Investment Agreement with an investment of approximately $2.0 billion. Following the Second Closing, Scotiabank owns approximately 14.9% of our common stock. In conjunction with the investment from Scotiabank, we executed a strategic repositioning of our securities available-for-sale portfolio, selling $7.0 billion and $3.0 billion in market value of low-yielding investment securities in the third and fourth quarters of 2024, respectively. The sales resulted in a total pre-tax loss of $1.8 billion. Proceeds from the sales were invested in shorter-duration, higher-yielding investment securities. From time to time, KeyCorp or KeyBank may seek to retire, repurchase, or exchange outstanding debt, capital securities, preferred shares, or common shares through cash purchase, privately negotiated transactions or other means. Additional information on repurchases of Common Shares by KeyCorp is included in Part II, Item 5. Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities of this report. Such transactions depend on prevailing market conditions, our liquidity and capital requirements, contractual restrictions, regulatory requirements, and other factors. The amounts involved may be material, individually or collectively. The Consolidated Statements of Cash Flows summarize our sources and uses of cash by type of activity for the years ended December 31, 2024, and December 31, 2023. Credit risk management Credit risk is the risk of loss arising from an obligor’s inability or failure to meet contractual payment or performance terms. Like other financial services institutions, we make loans, extend credit, distribute credit risk, purchase securities, provide financial and payments products, and enter into financial derivative contracts, all of which have related credit risk. Credit policy, approval, and evaluation We manage credit risk exposure through a multifaceted program. The Credit Risk Committee approves management credit policies and recommends significant credit policies to the Enterprise Risk Management Committee, the KeyBank Board, and the Risk Committee of the Board for approval. These policies are communicated throughout the organization to foster a consistent approach to granting credit. Our credit risk management team and certain individuals within our lines of business, to whom credit risk management has delegated limited credit authority, are responsible for credit approval. Individuals with assigned credit authority are authorized to grant exceptions to credit policies. It is not unusual to make exceptions to established policies when mitigating circumstances dictate, however, a corporate level tolerance has been established to keep exceptions at an acceptable level based upon portfolio and economic considerations. 86 Table of contents Our credit risk management team uses risk models to evaluate consumer loans. These models, known as scorecards, forecast the probability of serious delinquency and default for an applicant. The scorecards are embedded in the application processing system, which allows for real-time scoring and automated decisions for many of our products. We periodically validate the loan scoring processes. We maintain an active concentration management program to mitigate concentration risk in our credit portfolios. For individual obligors, we employ a sliding scale of exposure, known as hold limits, which is dictated by the type of loan and strength of the borrower. Allowance for loan and lease losses We estimate the appropriate level of the ALLL on at least a quarterly basis. The methodology used is described in Note 1 (“Summary of Significant Accounting Policies”) under the heading “Allowance for Loan and Lease Losses.” Briefly, the ALLL estimate uses various models and estimation techniques based on our historical loss experience, current borrower characteristics, current conditions, reasonable and supportable forecasts and other relevant factors. The ALLL at December 31, 2024, represents our best estimate of the lifetime expected credit losses inherent in the loan portfolio at that date. For more information, see Note 5 (“Asset Quality”). As shown in Figure 29, our ALLL from continuing operations decreased by $99 million, or 6.6%, from December 31, 2023. The commercial ALLL decreased by $23 million, or 2.2%, from December 31, 2023, driven by strategic balance sheet reductions and changes in the economic outlook, partly offset by portfolio credit migration. The consumer ALLL decreased $76 million, or 17.0%, from December 31, 2023, also largely driven by balance sheet reductions and economic forecasts, including improved home price values. Figure 29. Allocation of the Allowance for Loan and Lease Losses 2024 2023 December 31, Dollars in millions Total Allowance Percent of Allowance to Total Allowance Percent of Loan Type to Total Loans Total Allowance Percent of Allowance to Total Allowance Percent of Loan Type to Total Loans Commercial and industrial $ 639 45.4 % 50.7 % $ 556 36.9 % 49.6 % Commercial real estate: Commercial mortgage 320 22.7 12.8 419 27.8 13.5 Construction 51 3.6 2.8 52 3.4 2.7 Total commercial real estate loans 371 26.3 15.6 471 31.2 16.2 Commercial lease financing 27 1.9 2.6 33 2.2 3.1 Total commercial loans 1,037 73.6 68.9 1,060 70.3 68.9 Real estate — residential mortgage 90 6.4 19.1 162 10.7 18.6 Home equity loans 70 5.0 6.1 86 5.7 6.4 Other consumer loans 136 9.6 5.0 122 8.1 5.2 Credit cards 76 5.4 .9 78 5.2 .9 Total consumer loans 372 26.4 31.1 448 29.7 31.1 Total loans (a) $ 1,409 100.0 % 100.0 % $ 1,508 100.0 % 100.0 % (a) Excludes allocations of the ALLL related to the discontinued operations of the education lending business in the amount of $13 million at December 31, 2024, and $16 million at December 31, 2023. 87 Table of contents Net loan charge-offs Figure 30 shows the trend in our net loan charge-offs by loan type, while the composition of loan charge-offs and recoveries by type of loan is presented in Figure 32. Figure 31 shows the ratio of net charge-offs by loan category as a percentage of the respective average loan balance. Over the past 12 months, net loan charge-offs increased $196 million, with the most significant amounts coming from charge-offs of commercial and industrial loans from consumer goods related exposures. Figure 30. Net Loan Charge-offs from Continuing Operations (a) Year ended December 31, Dollars in millions 2024 2023 Commercial and industrial $ 305 $ 144 Real estate — commercial mortgage 38 37 Real estate — construction — (1) Commercial lease financing 2 (5) Total commercial loans 345 175 Real estate — residential mortgage (2) (3) Home equity loans — (1) Other consumer loans 56 43 Credit cards 41 30 Total consumer loans 95 69 Total net loan charge-offs $ 440 $ 244 Net loan charge-offs to average loans .41 % .21 % Net loan charge-offs from discontinued operations — education lending business $ 3 $ 3 (a) Credit amounts indicate that recoveries exceeded charge-offs. Figure 31. Net Loan Charge-offs to Average Loans from Continuing Operations (a) Year ended December 31, 2024 2023 Commercial and industrial 0.56 % 0.24 % Real estate — commercial mortgage 0.27 0.23 Real estate — construction — (0.04) Commercial lease financing 0.05 (0.14) Total commercial loans 0.46 0.21 Real estate — residential mortgage (0.01) (0.01) Home equity loans — (0.01) Other consumer loans 1.01 0.69 Credit cards 4.44 3.04 Total consumer loans 0.29 0.19 Total net loan charge-offs 0.41 % 0.21 % (a) Credit amounts indicate that recoveries exceeded charge-offs. 88 Table of contents Figure 32. Summary of Loan and Lease Loss Experience from Continuing Operations Year ended December 31, Dollars in millions 2024 2023 Average loans outstanding $ 107,724 $ 118,004 Allowance for loan and lease losses at beginning of period $ 1,508 $ 1,337 Loans charged off: Commercial and industrial $ 363 $ 188 Real estate — commercial mortgage 40 39 Real estate — construction — — Total commercial real estate loans (a) 40 39 Commercial lease financing 7 — Total commercial loans (b) 410 227 Real estate — residential mortgage 3 1 Home equity loans 2 2 Other consumer loans 64 51 Credit cards 47 37 Total consumer loans 116 91 Total loans charged off 526 318 Recoveries: Commercial and industrial 58 44 Real estate — commercial mortgage 2 2 Real estate — construction — 1 Total commercial real estate loans (a) 2 3 Commercial lease financing 5 5 Total commercial loans (b) 65 52 Real estate — residential mortgage 5 4 Home equity loans 2 3 Other consumer loans 8 8 Credit cards 6 7 Total consumer loans 21 22 Total recoveries 86 74 Net loan charge-offs (440) (244) Provision (credit) for loan and lease losses 341 415 Allowance for loan and lease losses at end of year $ 1,409 $ 1,508 Liability for credit losses on lending-related commitments at beginning of the year 296 225 Provision (credit) for losses on lending-related commitments (6) 74 Liability for credit losses on lending-related commitments at end of the year (c) $ 290 $ 296 Total allowance for credit losses at end of the year $ 1,699 $ 1,804 Net loan charge-offs to average total loans .41 % .21 % Allowance for loan and lease losses to period-end loans 1.35 1.34 Allowance for credit losses to period-end loans 1.63 1.60 Allowance for loan and lease losses to nonperforming loans 185.9 262.7 Allowance for credit losses to nonperforming loans 224.1 % 314.3 % Discontinued operations — education lending business: Loans charged off $ 4 $ 4 Recoveries 1 1 Net loan charge-offs $ (3) $ (3) (a) See Figure 10 and the accompanying discussion in the “Loans and loans held for sale” section for more information related to our commercial real estate loan portfolio. (b) See Figure 9 and the accompanying discussion in the “Loans and loans held for sale” section for more information related to our commercial loan portfolio. (c) Included in “accrued expense and other liabilities” on the balance sheet. Nonperforming assets Figure 33 shows the composition of our nonperforming assets. As shown in Figure 33, nonperforming assets increased $181 million during 2024. See Note 1 (“Summary of Significant Accounting Policies”) under the headings “Nonperforming Loans,” “Impaired Loans,” and “Allowance for Loan and Lease Losses” for a summary of our nonaccrual and charge-off policies. 89 Table of contents Figure 33. Summary of Nonperforming Assets and Past Due Loans from Continuing Operations December 31, Dollars in millions 2024 2023 Commercial and industrial $ 322 $ 297 Real estate — commercial mortgage 243 100 Real estate — construction — — Total commercial real estate loans (a) 243 100 Commercial lease financing — — Total commercial loans (b) 565 397 Real estate — residential mortgage 92 71 Home equity loans 89 97 Other consumer loans 5 4 Credit cards 7 5 Total consumer loans 193 177 Total nonperforming loans 758 574 Nonperforming loans held for sale — — OREO 14 17 Other nonperforming assets — — Total nonperforming assets $ 772 $ 591 Accruing loans past due 90 days or more $ 90 $ 107 Accruing loans past due 30 through 89 days 206 222 Restructured loans — accruing and nonaccruing (c) N/A N/A Restructured loans included in nonperforming loans (c) N/A N/A Nonperforming assets from discontinued operations — education lending business 2 3 Nonperforming loans to period-end portfolio loans .73 % .51 % Nonperforming assets to period-end portfolio loans plus OREO and other nonperforming assets (c) .74 .52 (a) See Figure 10 and the accompanying discussion in the “Loans and loans held for sale” section for more information related to our commercial real estate loan portfolio. (b) See Figure 9 and the accompanying discussion in the “Loans and loans held for sale” section for more information related to our commercial loan portfolio. (c) Restructured loans are those for which Key, for reasons related to a borrower’s financial difficulties, grants a concession to the borrower that it would not otherwise consider. See Note 5 (“Asset Quality“) for more information. These concessions are made to improve the collectability of the loan and generally take the form of a reduction of the interest rate, extension of the maturity date or reduction in the principal balance. Figure 34 shows the types of activity that caused the change in our nonperforming loans during each of the last four quarters and the years ended December 31, 2024, and December 31, 2023. Figure 34. Summary of Changes in Nonperforming Loans from Continuing Operations 2024 Quarters Dollars in millions 2024 Fourth Third Second First 2023 Balance at beginning of period $ 574 $ 728 $ 710 $ 658 $ 574 $ 387 Loans placed on nonaccrual status 1,140 309 271 317 243 768 Charge-offs (526) (131) (167) (131) (97) (318) Loans sold (72) (13) (32) (22) (5) (38) Payments (259) (111) (37) (76) (35) (132) Transfers to OREO (6) (2) (1) (1) (2) (9) Loans returned to accrual status (93) (22) (16) (35) (20) (84) Balance at end of period $ 758 $ 758 $ 728 $ 710 $ 658 $ 574 Operational and compliance risk management Like all businesses, we are subject to operational risk, which is the risk of loss resulting from human error or malfeasance, inadequate or failed internal processes and systems, and external events. These events include, among other things, threats to our cybersecurity, as we are reliant upon information systems and the internet to conduct our business activities. Operational risk intersects with compliance risk, which is the risk of loss from violations of, or noncompliance with, laws, rules and regulations, prescribed practices, and ethical standards. Under the Dodd-Frank Act, large financial companies like Key are subject to heightened prudential standards and regulation. This heightened level of regulation has increased our operational risk. While operational and compliance risk are separate risk disciplines in KeyCorp’s ERM framework, losses and/or additional regulatory compliance costs are included in operational loss reporting and could take the form of explicit charges, increased operational costs, or harm to our reputation. We seek to mitigate operational risk through identification and measurement of risk, alignment of business strategies with risk appetite and tolerance, and a system of internal controls and reporting. We continuously strive to strengthen our system of internal controls to improve the oversight of our operational risk and to ensure compliance with laws, rules, and regulations. For example, an operational event database tracks the amounts and sources of 90 Table of contents operational risk and losses. This tracking mechanism helps to identify weaknesses and to highlight the need to take corrective action. We also rely upon software programs designed to assist in assessing operational risk and monitoring our control processes. This technology has enhanced the reporting of the effectiveness of our controls to senior management and the Board. The Operational Risk Management Program provides the framework for the structure, governance, roles, and responsibilities, as well as the content, to manage operational risk for Key. The Compliance Risk Management Program serves the same function in managing compliance risk for Key. The Operational Risk Committee and the Compliance Risk Committee support the ERM Committee by identifying early warning events and trends, escalating emerging risks, and discussing forward-looking assessments. Both the Operational Risk Committee and the Compliance Risk Committee include attendees from each of the Three Lines of Defense. Primary responsibility for managing and monitoring internal control mechanisms lies with the managers of our various lines of business. The Operational Risk Committee and Compliance Risk Committee are senior management committees that oversee our level of operational and compliance risk and direct and support our operational and compliance infrastructure and related activities. These committees and the Operational Risk Management and Compliance Risk Management functions are an integral part of our ERM Program. Our Risk Review function regularly assesses the overall effectiveness of our Operational Risk Management and Compliance Risk Management Programs and our system of internal controls. Risk Review reports the results of reviews on internal controls and systems to senior management and the Audit Committee and updates the Risk Committee, as appropriate, on matters related to the oversight of these controls. Cybersecurity For information on our cybersecurity risk management and governance practices, please see Item 1C. Cybersecurity of this report. GAAP to Non-GAAP Reconciliations Non-GAAP financial measures have inherent limitations, are not required to be uniformly applied, and are not audited. Although these non-GAAP financial measures are frequently used by investors to evaluate a company, they have limitations as analytical tools, and should not be considered in isolation, nor as a substitute for analyses of results as reported under GAAP. The tangible common equity ratio and the return on tangible common equity ratio have been a focus for some investors, and management believes that these ratios may assist investors in analyzing Key’s capital position without regard to the effects of intangible assets and preferred stock. Since analysts and banking regulators may assess our capital adequacy using tangible common equity, we believe it is useful to enable investors to assess our capital adequacy on these same bases. 91 Table of contents Year ended December 31, Dollars in millions 2024 2023 2022 Tangible common equity to tangible assets at period end Key shareholders’ equity (GAAP) $ 18,176 $ 14,637 $ 13,454 Less: Intangible assets (a) 2,779 2,806 2,844 Preferred Stock (b) 2,446 2,446 2,446 Tangible common equity (non-GAAP) $ 12,951 $ 9,385 $ 8,164 Total assets (GAAP) $ 187,168 $ 188,281 $ 189,813 Less: Intangible assets (a) 2,779 2,806 2,844 Tangible assets (non-GAAP) $ 184,389 $ 185,475 $ 186,969 Tangible common equity to tangible assets ratio (non-GAAP) 7.02 % 5.06 % 4.37 % Average tangible common equity Average Key shareholders’ equity (GAAP) $ 15,408 $ 13,881 $ 14,730 Less: Intangible assets (average) (c) 2,793 2,826 2,839 Preferred Stock (average) 2,500 2,500 2,114 Average tangible common equity (non-GAAP) $ 10,115 $ 8,555 $ 9,777 Return on average tangible common equity from continuing operations Income (loss) from continuing operations attributable to Key common shareholders (GAAP) $ (306) $ 821 $ 1,793 Average tangible common equity (non-GAAP) $ 10,115 $ 8,555 $ 9,777 Return on average tangible common equity from continuing operations (non-GAAP) (3.03) % 9.60 % 18.34 % Return on average tangible common equity consolidated Net income (loss) attributable to Key common shareholders (GAAP) $ (304) $ 824 $ 1,799 Average tangible common equity (non-GAAP) 10,115 8,555 9,777 Return on average tangible common equity consolidated (non-GAAP) (3.01) % 9.63 % 18.40 % (a) For the years ended December 31, 2024, December 31, 2023, and December 31, 2022, intangible assets exclude less than $1 million, $1 million, and $2 million, respectively, of period-end purchased credit card relationships. (b) Net of capital surplus. (c) For the years ended December 31, 2024, December 31, 2023, and December 31, 2022, average intangible assets exclude less than $1 million, $1 million, and $2 million, respectively, of average purchased credit card relationships. Adjusted noninterest expense and adjusted noninterest income are non-GAAP measures in that they are adjusted to exclude the impact of certain items. Management believes adjusting for the selected items provide investors with useful information to gain a better understanding of ongoing operations and enhance comparability of results with prior periods, as well as demonstrate the effects of the financial impacts related to those selected items. Year ended December 31, Dollars in millions 2024 2023 2022 Adjusted noninterest expense Noninterest expense (GAAP) $ 4,545 $ 4,734 $ 4,410 Adjustments: Efficiency related expenses — (131) — Pension settlement (other expense) — (18) — FDIC special assessment (other expense) (25) (190) — Adjusted noninterest expense (non-GAAP) $ 4,520 $ 4,395 $ 4,410 Adjusted noninterest income Noninterest income (GAAP) $ 809 $ 2,470 $ 2,718 Adjustments: Loss on sale of securities for securities repositioning 1,833 — — Scotiabank investment agreement valuation (other income) 3 — — Adjusted noninterest income (non-GAAP) $ 2,645 $ 2,470 $ 2,718 Critical Accounting Policies and Estimates Our business is dynamic and complex. Consequently, we must exercise judgment in choosing and applying accounting policies and methodologies. These choices are critical; not only are they necessary to comply with GAAP, they also reflect our view of the appropriate way to record and report our overall financial performance. All accounting policies are important, and all policies described in Note 1 (“Summary of Significant Accounting Policies”) should be reviewed for a greater understanding of how we record and report our financial performance. In our opinion, some accounting policies are more likely than others to have a critical effect on our financial results and to expose those results to potentially greater volatility. These policies apply to areas of relatively greater business importance, or require us to exercise judgment and to make assumptions and estimates that affect amounts reported in the financial statements. Because these assumptions and estimates are based on current circumstances, they may prove to be inaccurate, or we may find it necessary to change them. The following is a description of our current critical accounting policies. 92 Table of contents Allowance for loan and lease losses The allowance for loan and lease losses represents management’s estimate of all expected credit losses over the expected contractual life of our existing loan portfolio. Determining the appropriateness of the allowance is complex and requires judgment by management about the effect of matters that are inherently uncertain. These critical estimates include significant use of our own historical data and complex methods to interpret them. We have an ongoing process to evaluate and enhance the quality, quantity, and timeliness of our data and interpretation methods used in the determination of these allowances. These evaluations are inherently subjective, as they require material estimates and may be susceptible to significant change, and include, among others: • PD, • LGD, • Outstanding balance of the loan, • Movement through delinquency stages, • Amounts and timing of expected future cash flows, • Value of collateral, which may be obtained from third parties, • Economic forecasts which are obtained from a third party provider, and • Qualitative factors, such as changes in current economic conditions, that may not be reflected in modeled results. As described in our accounting policy related to the ALLL in Note 1 (“Summary of Significant Accounting Policies”) of this report under the heading “Allowance for Loan and Lease Losses," we employ a disciplined process and methodology to establish our ALLL, which has three main components: (i) asset specific / individual loan reserves; (ii) quantitative (formulaic or pooled) reserves; and (iii) qualitative (judgmental) reserves. We use a non-DCF factor-based approach to estimate expected credit losses that include component PD/LGD/EAD models as well as less complex estimation methods for smaller loan portfolios. Probability of default models estimate the likelihood a borrower will cease making payments as agreed. These models use observed loan-level information and projected paths of macroeconomic variables. Borrower credit attributes including FICO scores of consumers and internally assigned risk ratings for commercial borrowers are significant inputs to the models. Consumer FICO scores are refreshed quarterly and commercial risk ratings are updated annually with select borrowers updated more frequently. The macroeconomic trends that have a significant impact on the probability of default vary by portfolio segment. Exposure at default models estimate the loan balance at the time of default. We use an amortization based formulaic approach to estimate account level EAD for all term loans. We use portfolio specific methods in each of our revolving product portfolios. LGD models estimate the loss we will suffer once a loan is in default. Account level inputs to LGD models include collateral attributes, such as loan to value. If we observe limitations in the data or models, we use model overlays to make adjustments to model outputs to capture a particular risk or compensate for a known limitation. These variables and others may result in actual loan losses that differ from the originally estimated amounts. This estimate produced by our models is forward-looking and requires management to use forecasts about future economic conditions to determine the expected credit loss over the remaining life of an instrument. Moody’s Consensus forecast is our source of macroeconomic projections, including the interest rate forecasts used in the credit models. We use a two year reasonable and supportable period across all products to forecast economic conditions. As the length of the life of a financial asset increases, these inputs may become impractical to estimate as reasonable and supportable. We believe the two year time horizon appropriately aligns with our business planning, available industry guidance, and reliability of various forecasting services. Following this two year period in which supportable forecasts can be generated, for all modeled loan portfolios, we revert expected credit losses to a level that is consistent with our historical information by reverting the macroeconomic variables (model inputs) to their long run average. We revert to historical loss rates for less complex estimation methods for smaller portfolios. A four quarter reversion period is used where the macroeconomic variables linearly revert to their long run average following the two year reasonable and supportable period. We use a 20 year lookback period for determining long run historical average of the macroeconomic variables. We determined the 20 year lookback period is appropriate as it captures the previous two economic cycles as well as the impact from the pandemic. The ALLL is sensitive to various macroeconomic drivers such as GDP and unemployment as well as portfolio attributes such as remaining term, outstanding balance, risk ratings, FICO, LTV, and delinquency status. Our ALLL models were designed to capture the correlation between economic and portfolio changes. As such, evaluating 93 Table of contents shifts in individual portfolio attributes and macroeconomic variables in isolation may not be indicative of past or future performance. It is difficult to estimate how potential changes in any one factor or input might affect the overall ALLL because we consider a wide variety of factors and inputs in estimating the ALLL. Changes in the factors and inputs considered may not occur at the same rate and may not be consistent across all geographies or product types, and changes in factors and input may be directionally inconsistent, such that improvement in one factor may offset deterioration in others. However, to consider the impact of a hypothetical alternate economic forecast, we compare the modeled quantitative allowance results using a downside economic scenario. The maximum difference in the quarterly macroeconomic variables between the base and downside scenarios over the two year reasonable and supportable period includes an approximate 5 percentage point decline in GDP annualized growth and an approximate 4 percentage point increase in the U.S. unemployment rate. The difference between these two scenarios would have driven an increase of approximately 1.6x for commercial and 1.7x for the consumer modeled allowance results. Similarly, deteriorating conditions for portfolio factors were also considered by moderately stressing key portfolio drivers, relative to the baseline portfolio conditions. Stressing risk ratings by two ratings for commercial loans generates a 1.5x increase in the commercial modeled allowance results. Stressing FICO by ten points, and LTV and utilization by 10% for consumer loans generates a 1.2x increase in the consumer modeled allowance results. Note that these analyses demonstrate the sensitivity of the ALLL to key quantitative assumptions, but exclude potential impacts to non-modeled allowance components and reserves for individually assessed loans. Furthermore, these analyses are not intended to estimate changes in the overall ALLL as they do not reflect qualitative factors, changes in current economic conditions that may not be reflected in quantitatively derived results, and other relevant factors that must be considered to ensure the ALLL reflects our best estimate of current expected credit losses. Valuation methodologies Fair value measurements We measure or monitor many of our assets and liabilities on a fair value basis. Fair value is generally defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) as opposed to the price that would be paid to acquire the asset or received to assume the liability (an entry price), in an orderly transaction between market participants at the measurement date under current market conditions. While management uses judgment when determining the price at which willing market participants would transact when there has been a significant decrease in the volume or level of activity for the asset or liability in relation to “normal” market activity, management’s objective is to determine the point within the range of fair value estimates that is most representative of a sale to a third-party investor under current market conditions. A fair value measure should reflect the assumptions that market participants would use in pricing the asset or liability, including the assumptions about the risk inherent in a particular valuation technique, the effect of a restriction on the sale or use of an asset and the risk of nonperformance. Fair value is measured based on a variety of inputs. Fair value may be based on quoted market prices for identical assets or liabilities traded in active markets (Level 1 valuations). If market prices are not available, quoted market prices for similar instruments traded in active markets, quoted prices for identical or similar instruments in markets that are not active, or model-based valuation techniques for which all significant assumptions are observable in the market are used (Level 2 valuations). Where observable market data is not available, the valuation is generated from model based techniques that use significant assumptions not observable in the market, but observable based on our specific data (Level 3 valuations). Unobservable assumptions reflect our estimates for assumptions that market participants would use in pricing the asset or liability. Valuation techniques typically include option pricing models, discounted cash flow models and similar techniques, but may also include the use of market prices of assets or liabilities that are not directly comparable to the subject asset or liability. The selection and weighting of the various fair value techniques may result in a fair value higher or lower than carrying value. Considerable judgment may be involved in determining the amount that is most representative of fair value. For assets and liabilities recorded at fair value, our policy is to maximize the use of observable inputs and minimize the use of unobservable inputs when developing fair value measurements for those items where there 94 Table of contents is an active market. In certain cases, when market observable inputs for model-based valuation techniques may not be readily available, we are required to make judgments about assumptions market participants would use in estimating the fair value of the financial instrument. The models used to determine fair value adjustments are regularly evaluated by management for relevance under current facts and circumstances. Changes in market conditions may reduce the availability of quoted prices or observable data. For example, reduced liquidity in the capital markets or changes in secondary market activities could result in observable market inputs becoming unavailable. When market data is not available, we use valuation techniques requiring more management judgment to estimate the appropriate fair value. Fair value is used on a recurring basis for certain assets and liabilities in which fair value is the primary measure of accounting. Fair value is used on a nonrecurring basis to measure certain assets or liabilities (including held-to-maturity securities, commercial loans held for sale, and OREO) for impairment or for disclosure purposes in accordance with current accounting guidance. Impairment analysis also relates to long-lived assets and core deposit and other intangible assets. An impairment loss is recognized if the carrying amount of the asset is not likely to be recoverable and exceeds its fair value. In determining the fair value, management uses models and applies the techniques and assumptions previously discussed. See Note 1 under the heading “Fair Value Measurements” and Note 6 (“Fair Value Measurements”) for a detailed discussion of determining fair value, including pricing validation processes. Goodwill The valuation and testing methodologies used in our analysis of goodwill impairment are summarized in Note 1 under the heading “Goodwill and Other Intangible Assets.” Goodwill is initially recorded as the excess of the purchase price over the fair value of net assets acquired in a business combination. Goodwill is tested for impairment for all three of our reporting units: Consumer Bank, Commercial Bank and Institutional Bank. We perform our annual impairment test as of October 1st and on an interim basis if events or changes in circumstances between annual tests suggest additional testing is needed. Testing may be either quantitative or qualitative. Fair value is measured during quantitative tests using a combination of income and market approaches. If the fair value of a reporting unit declines below its carrying value, an impairment charge will be recognized for any amount by which the carrying value exceeds the reporting unit’s fair value, to the extent that the loss recognized does not exceed the amount of the goodwill allocated to that reporting unit. When utilizing the qualitative testing approach, Key examines numerous qualitative factors such as financial performance, market capitalization and other industry and economic trends to conclude whether it is more likely than not that goodwill is impaired. Effective in the first quarter of 2024, we realigned our real estate capital business from our Commercial Bank reporting unit to our Institutional Bank reporting unit. The move was done to align product-based teams to the client-facing businesses they serve with the goal of reducing overhead and complexity and creating a better client experience. Additionally, due to the realignment, a portion of goodwill was reallocated from our Commercial Bank reporting unit to our Institutional Bank reporting unit immediately after the realignment based on the relative fair value of the transferred business. This realignment was identified as a triggering event for purposes of goodwill impairment testing. As a result, interim goodwill impairment tests were performed during the first quarter of 2024 reflecting the reporting units both immediately before and immediately after the realignment, neither of which resulted in impairment. The quantitative test estimates the fair value of the reporting units using the income approach (weighted 50%) and two market based approaches: the publicly traded company approach (weighted 25%) and the recent transactions approach (weighted 25%). For the market based approaches, valuations of reporting units considered a combination of earnings and equity multiples based on either public companies with characteristics similar to the reporting unit or actual prices paid from recent transactions. Since the fair values determined under the market approaches are representative of noncontrolling interests, the valuations incorporated a control premium. For the income approach, estimated future cash flows were derived from internal forecasts and economic expectations for each reporting unit. The inputs and assumptions utilized for the valuation of each reporting unit include projections of future cash flows, discount rates, valuation multiples of comparable public companies, and recent transaction information. Future cash 95 Table of contents flows are based on multi-year forecasts for each reporting unit and include inputs and assumptions such as net interest margin, expected credit losses, noninterest income, noninterest expense, and required capital. A terminal growth rate is estimated for each reporting unit based on market expectations of inflation and economic conditions in the financial services industry. Discount rates are developed using the Capital Asset Pricing Model (“CAPM”) which considers a risk free rate, 5-year adjusted beta based on peer companies, a market equity risk premium, a size premium, and a company specific risk premium. The discount rates used for the Consumer, Commercial, and Institutional reporting units were, 13%, 13.5%, and 13.5%, respectively. The results of the interim quantitative goodwill impairment tests indicated that the fair values of the Consumer, Commercial and Institutional Bank reporting units were in excess of their respective carrying values both immediately prior to and immediately after the realignment, therefore, there was no goodwill impairment. The fair values of the Consumer Bank and Commercial Bank reporting units were in excess of their respective carrying values by greater than 10% immediately prior to the realignment. However, for the Institutional Bank reporting unit, the fair value of the reporting unit exceeded its carrying value by less than 4% prior to the reporting unit realignment. The fair values of all reporting units were in excess of their carrying values by greater than 10% immediately after the realignment. The combined fair value of all reporting units immediately before and immediately after the realignment was considered reasonable by comparison to Key's market capitalization. The estimated fair values of each reporting unit are sensitive to changes in management’s estimates and assumptions. Changes in the estimates and assumptions could result in instances in which the fair value of a reporting unit is less than its carrying value. We performed sensitivity analyses around certain assumptions to assess their reasonableness and impact on the reporting units’ fair values. The analysis of the Institutional Bank reporting unit immediately before the realignment indicated that if the discount rate utilized in the income approach was increased or decreased by 50 basis points, the estimated fair value of the reporting unit would have decreased or increased approximately 4%, respectively. If the net interest margin utilized in the income approach was increased or decreased by 25 basis points, the estimated fair value of the reporting unit would have increased or decreased by approximately 19%, respectively, with a decrease resulting in impairment of goodwill recorded at the Institutional Bank reporting unit. Determining the fair value of a reporting unit is subject to uncertainty as it is reliant on estimates of cash flows that extend far into the future, and, by their nature, are difficult to estimate over such an extended time frame. In the future, changes in the assumptions or the discount rate could produce a material non-cash goodwill impairment. The results of the impairment test after the realignment, however, indicated the fair value of each of the three reporting units, Consumer, Commercial, and Institutional, exceeded their respective carrying values by more than 10%. The estimated fair value of the Consumer Bank reporting unit was 18% greater than its carrying amount, the estimated fair value of the Commercial Bank reporting unit was 25% greater than its carrying amount, and the estimated fair value of the Institutional Bank reporting unit was 34% greater than its carrying amount. We performed an annual qualitative impairment test for all three of our reporting units as of October 1, 2024. This test involved reviewing updated internal forecasts, evaluating market data, assessing reasonableness of critical assumptions used in the last quantitative goodwill impairment test and considering recent transactions and events that could impact the goodwill at each reporting unit. Key concluded it was not more likely than not that goodwill was impaired as of October 1, 2024, our annual testing date. Additionally, we monitored events and circumstances during the period from October 1, 2024 through December 31, 2024, including macroeconomic and market factors, industry and banking sector events, Key specific performance indicators, and updated management forecasts. Based on these considerations, we concluded that it was not more-likely-than-not that the fair value of one or more of the reporting units was below its respective carrying value as of December 31, 2024. Additional information is provided in Note 12 (“Goodwill and Other Intangible Assets”). Derivatives and hedging We primarily use interest rate swaps to hedge interest rate risk for asset and liability management purposes. These derivative instruments modify the interest rate characteristics of specified on-balance sheet assets and liabilities. Our accounting policies related to derivatives reflect the current accounting guidance, which provides that all derivatives should be recognized as either assets or liabilities on the balance sheet at fair value, after taking into account the effects of master netting agreements. Accounting for changes in the fair value (i.e., gains or losses) of a particular derivative depends on whether the derivative has been designated and qualifies as part of a hedging relationship, and further, on the type of hedging relationship. 96 Table of contents The application of hedge accounting requires significant judgment to interpret the relevant accounting guidance, as well as to assess hedge effectiveness, identify similar hedged item groupings, and measure changes in the fair value of the hedged items. We believe our methods of addressing these judgments and applying the accounting guidance are consistent with both the guidance and industry practices. Additional information relating to our use of derivatives is included in Note 1 under the heading “Derivatives and Hedging,” and Note 8 (“Derivatives and Hedging Activities”). Contingent liabilities, guarantees and income taxes Note 22 (“Commitments, Contingent Liabilities, and Guarantees”) summarizes contingent liabilities arising from litigation and contingent liabilities arising from guarantees in various agreements with third parties under which we are a guarantor, and the potential effects of these items on the results of our operations. We record a liability for the fair value of the obligation to stand ready to perform over the term of a guarantee. Contingent aspects of guarantees within the scope of ASC 326 are assessed a reserve under CECL. There is a risk that our actual future payments in the event of a default by the guaranteed party could exceed the recorded amount. See Note 22 (“Commitments, Contingent Liabilities, and Guarantees”) for a comparison of the liability recorded and the maximum potential undiscounted future payments for the various types of guarantees that we had outstanding at December 31, 2024. It is not always clear how the Internal Revenue Code and various state tax laws apply to transactions that we undertake. In the normal course of business, we may record tax benefits and then have those benefits contested by the IRS or state tax authorities. We have provided tax reserves that we believe are adequate to absorb potential adjustments that such challenges may necessitate. However, if our judgment later proves to be inaccurate, the tax reserves may need to be adjusted, which could have an adverse effect on our results of operations and capital. Additionally, we conduct quarterly assessments that determine the amount of deferred tax assets that are more-likely-than-not to be realized, and therefore recorded. The available evidence used in connection with these assessments includes a history of pretax income, projected future taxable income, potential tax-planning strategies, and projected future reversals of deferred tax liabilities. These assessments are subjective and may change. Based on these criteria, and all available positive and negative evidence, we establish a valuation allowance for deferred tax assets when we are unable to conclude it is more likely than not that they will be realized. However, if our assessments prove incorrect, they could have a material adverse effect on our results of operations in the period in which they occur. For further information on our accounting for income taxes, see Note 1 (“Summary of Significant Accounting Policies”) and Note 14 (“Income Taxes”). 97 Table of contents Accounting and reporting developments The following table presents accounting guidance pending adoption. Standard Required Adoption Description Effect on Financial Statements or Other Significant Matters ASU 2023-06 Disclosure Improvements The date on which the SEC’s removal of related disclosures from Regulation S-X or Regulation S-K becomes effective. Early adoption is prohibited. This guidance clarifies and improves disclosure requirements for a variety of topics to align with the SEC's regulations. The amendments should be applied prospectively. The guidance is not expected to have a material impact on Key’s disclosures. ASU 2024-03 Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Topic 220-40) January 1, 2027 Early adoption is permitted. The guidance requires public companies disclose additional information about certain types of costs and expenses. The guidance should be applied on a prospective or retrospective basis. The guidance is not expected to have a material impact on Key’s disclosures. ASU 2024-04 Debt—Debt with Conversion and Other Options (Topic 470-20) January 1, 2026 Early adoption is permitted. The guidance clarifies criteria to determine whether a settlement of a convertible debt instrument should be accounted for as an induced conversion. The guidance should be applied on a prospective or retrospective basis. The guidance is not expected to have a material impact on Key’s disclosures. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The information included under the caption “Risk Management — Market risk management” in the MD&A beginning on page 78 is incorporated herein by reference. 98 Table of contents